By Samer Hasn, Senior Market Analyst at XS.com
Oil prices are rebounding today by more than 1% across both Brent and WTI crudes after losing about 2% yesterday.
Yesterday’s oil price losses coincided with the broad losses that hit stock markets around the world as the Chinese AI product DeepSeek emerged and outperformed its American counterparts on several metrics. While these losses may raise questions about the direct relationship between this development and the oil market.
Yesterday’s shock led to a wave of commentary from experts and opinion columnists that talked on how the United States under Donald Trump can confront this Chinese technological expansion.
The Editorial Board of the Wall Street Journal, known for its constant criticism of the policies of the ruling party in China, believes that the artificial intelligence sector should be supported under Trump not only by injecting money but also by rethinking regulatory restrictions on the development of AI models and antitrust rules.
In addition to highlighting the flaws in regulatory reality and government support, Thomas Friedman, in an opinion piece in The New York Times, harshly criticized Trump’s move to re-subsidize fossil fuel power generation at the expense of renewables. Friedman believes that China would be happy with this wrong approach, which would weaken the United States. Friedman also believes that whoever has the smartest, cheapest, and most efficient ecosystem of artificial intelligence, electric vehicles, smart batteries, and abundant clean electricity will dominate in the 21st century.
Therefore, it is not unlikely that this shock we witnessed in the markets yesterday will lead to a wake-up call in the US administration that may lead to rethinking energy policies, where artificial intelligence requires a lot of energy – and, as we mentioned, it must be from renewables. If this happens, it may put further pressure on oil prices to decline, not by encouraging increased extraction, which Trump is pushing, but by reviving and accelerating the shift to renewables.
Furthermore, Trump may take a more aggressive approach to his trade policy towards China, which may heighten concerns about the damage that the global economy may suffer because of the massive tariffs that may be imposed – Trump’s weapon of choice, as it seems, in any file. These tariffs would hurt exports from China, which the latter relies on to drive growth and achieve its goals.