Türkiye could experience a lower year-end inflation than expected if oil prices remain below $65 a barrel, according to a top economy official, as commodities have been dragged by concerns over the burgeoning trade war between the United States and China.
Oil prices were stable on Friday but on track for their second weekly loss in a row. Brent crude futures were up 38 cents, or 0.6%, at $63.71 a barrel by 10:33 a.m. GMT while U.S. West Texas Intermediate crude futures added 38 cents, or 0.63%, to $60.45.
The current course could benefit Türkiye, where the inflation rate could be 1 to 1.6 percentage points below official forecasts this year if oil prices follow the current trend or drop even further, Treasury and Finance Minister Mehmet Şimşek on Thursday.
Annual inflation slowed to 38.1% in March, according to official data. It marked the lowest since December 2022 and extended the fall from a peak of around 75% last May.
Şimşek said persistent oil prices below $65 could also mean Türkiye’s current account deficit stays below 1.5% of gross domestic product (GDP). He was responding to a Reuters question on the impact of a fall in oil prices following recent global trade measures.
The central bank’s year-end inflation estimate currently stands at 24%, while according to the government’s medium-term program, the current account deficit-to-GDP ratio is projected to be 2% this year.
Brent and WTI are poised to register weekly declines of almost 3% and 2.5% respectively, having both lost about 11% last week. Brent dipped below $60 a barrel at one point this week for its lowest since February 2021.
China announced on Friday that it will impose a 125% tariff on U.S. goods from Saturday, up from the previously announced 84%, after U.S. President Donald Trump raised tariffs against China to 145% on Thursday.
Trump this week paused heavy tariffs against dozens of trading partners, but a prolonged dispute between the world’s two biggest economies is likely to reduce global trade volumes and disrupt trading routes, weighing on global economic growth and reducing demand for oil.
The market has been rattled by a steep slump in U.S. crude futures to near $55 a barrel this month from about $78 the day before Trump was sworn in. Many companies say they cannot drill profitably if oil prices fall under $65 a barrel.
Oil markets, along with Wall Street, began a free fall on April 2 when Trump announced the new tariffs on trading partners. Shortly after, the Organization of the Petroleum Exporting Countries (OPEC) and its allies in OPEC+ said they would accelerate output hikes, pushing U.S. oil prices to their lowest levels since pandemic lockdowns crushed demand.
Analysts say the trade war between the U.S. and China leaves significant uncertainty over oil demand growth with more risk to the downside for prices. They say the levies would be more restrictive than anticipated and likely to push the global economy into a recession.
“It is a tariff-driven market influenced by the loss of confidence in transparent and succinct policymaking,” said PVM analyst Tamas Varga.
BMI analysts, meanwhile, “expect prices will remain under pressure as investors assess ongoing trade negotiations and rising tensions between Washington and Beijing.”
The U.S. Energy Information Administration (EIA) on Thursday sharply cut its estimate of U.S. crude prices to $63.88 per barrel for 2025 from a prior forecast of $70.68 a barrel, citing global trade policy and higher OPEC production.
Global oil consumption for 2025 is expected to increase by 0.9 million barrels per day (bpd), 0.4 million bpd less than EIA’s prior forecast.
The impact of tariffs could be “catastrophic” for developing countries, the director of the United Nations’ trade agency said on Friday.
ANZ Bank analysts forecast oil consumption to decline by 1% if global economic growth falls below 3%, said senior commodity strategist Daniel Hynes.
Speaking at an Organisation for Economic Co-operation and Development (OECD) event, Şimşek also said there are some downside risks to Turkish economic growth and budget revenue performance after recent turbulence in the markets.
“But one thing we can assure you is that spending controls will be there, and so we’ll deliver on spending commitments…we will achieve the end result of bringing inflation down. That’s really the key message here,” he said.
