The oil market is seeing significant volatility, with analysts attributing the shifts to a combination of a global tariff war and increased supply. As a result, the demand for downside protection has surged to its highest level since the pandemic, and oil prices are under pressure.
Edward Bell, Acting Group Head of Research and Chief Economist at Emirates NBD, noted that “time spreads” in Brent futures have shifted notably. The 1-6 month spread dropped from a $3 per barrel backwardation to barely above $1 per barrel. This shift is a sign of the growing instability in the market. 
In response to these market conditions, Emirates NBD has revised its Brent oil price forecast downward, adjusting it to $68 per barrel from $73, while WTI is expected to average $65 per barrel instead of the previous $71 per barrel forecast.
Although the WTI and Brent curves have not yet entered contango, analysts predict that if demand continues to weaken due to the global trade dispute, oil curves could break out of their backwardation, a trend that has been ongoing for several years.
The recent decline in oil prices can be traced back to trade tensions between the US and China. Following President Trump’s announcement of new tariffs on Chinese goods, Brent prices fell below $60 per barrel for the first time since Q1 2021. Though prices have since recovered slightly after the US delayed tariffs on several countries, they remain highly vulnerable to further downside.
At the same time, OPEC+ made a significant move by accelerating production increases, set for May. The group’s decision to bring forward some of its planned production hikes adds further pressure to an already unstable market. OPEC+ members who had been voluntarily cutting production will now boost output to meet targets, which could exacerbate market imbalances.
Several national oil companies within OPEC+ have also adjusted their official selling prices, a move some analysts interpret as an attempt to protect market share and potentially signal the beginning of a price war. A chaotic breakdown within OPEC+ could lead to even greater downside for oil prices.
Looking forward, Emirates NBD’s forecast has shifted, with expectations for oil prices to decline further in 2025. Increased supply from OPEC+, the US, Canada, and Guyana, combined with weaker demand, especially if recession fears grow, makes it likely that oil prices will experience a sharper decline.
For the GCC economies, the direct impact of the tariff war remains relatively low, as oil and natural gas are exempt from tariffs. However, the forecasted decline in oil prices is expected to strain fiscal and external positions across the region, signaling potential economic challenges.
