KEY POINTS
- Brent crude has fallen over 6% this month, deepening a 17% loss for 2025 so far.
- Trade frictions between the US and China, coupled with rate-cut expectations, are dragging sentiment.
- Analysts say the historical inverse link between oil and the US dollar is fading as export dynamics evolve.
Global oil markets are under renewed pressure as Brent crude prices dropped more than 6% in October, slipping toward $62 a barrel and struggling to hold above the $60 threshold.
The decline has extended this year’s losses to more than 17%, raising concerns about the health of global energy demand amid a weakening macroeconomic backdrop.
Crude began the year around $74 per barrel, briefly climbing to $81 in mid-January before entering a prolonged downward spiral. Analysts attribute the latest slump to a mix of geopolitical unease, monetary uncertainty, and shifting correlations between oil and the US dollar.
“While talks between Washington and Beijing continue, China’s defiant stance on trade has unsettled oil markets,” said Suvro Sarkar, an analyst at DBS Bank. “Producers are nervous about the rhetoric and its impact on global growth.”
Trade Frictions and Monetary Policy Keep Oil Under Pressure
Adding to the unease are expectations that the US Federal Reserve will implement two more rate cuts before year-end, following a 0.25% reduction earlier that lowered the federal funds rate to between 4.00% and 4.25%. While lower interest rates typically stimulate borrowing and business activity, they also dampen the dollar’s attractiveness, eroding investor confidence and contributing to volatility in commodities.
Oil prices, once negatively correlated with the dollar, are now moving in near lockstep with it. Analysts at J.P. Morgan note that the steady rise in US crude exports since 2022 has changed the dynamic, linking the dollar’s performance more closely to energy prices.
The US Energy Information Administration (EIA) reported that crude exports hit a record average of over 4.1 million barrels per day in 2024, a modest rise from 2023 but marking a consistent upward trajectory.
This shifting relationship means that a weaker dollar no longer necessarily supports oil prices. Instead, both tend to move together—an uncommon pattern that underscores how structural changes in global trade flows and US energy dominance are reshaping traditional market behaviour.
