Crude oil futures fell sharply Thursday, surrendering most of the previous session's strong gains, as the accelerating trade war between the U.S. and China heightens concerns about weaker global demand for energy at the same time that OPEC and its allies raise production.

The WTI and Brent benchmarks surged more than 4% in the previous session after dropping to their lowest levels in more than four years, after President Trump's decision to pause some tariffs against several countries for 90 days, but he also raised duties on China to 125%.

The ongoing trade war between the world's two largest economies is bearish for the global economy, and likely to preclude a large rally in oil, TP ICAP's Scott Shelton said, adding the 90-day pause is "a long time of waiting to see what happens with the rest of the world on tariffs, and short enough to keep people from investing in just about anything if their businesses are correlated with the import/export market."

"With a lot of uncertainty still existing, the prospect for a major rebound in crude is not possible at this stage when the market has to deal with the risk of weakening demand and rising production from OPEC," Saxo Bank's head of commodities strategy Ole Hansen wrote, adding that the world is "still looking at the worst tariffs since the 1930s."

U.S. crude inventories rose by a larger than expected 2.6M barrels last week, government data showed Wednesday, and Macquarie analysts said Thursday they expect another build this week.

Front-month Nymex crude (CL1:COM) for May delivery closed -3.6% to $60.07/bbl, and front-month Brent crude (CO1:COM) for June ended -3.3% to $63.33/bbl, this year's second-lowest settlement value for both benchmarks and the fifth day of losses out of six.

U.S. natural gas futures (NG1:COM) also fell as risk-off sentiment returned to markets, while a bearish 57B cf injection into storage for last week that cut the deficit over the five-year average to just 40B cf was partly offset by record flows of feedgas to LNG export terminals, Gelber & Associates said; the May front-month Nymex contract closed -6.8% to $3.557/MMBtu.

ETFs: (NYSEARCA:USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (USOI), (UNG), (BOIL), (KOLD), (UNL), (FCG)

In a bearish outlook, the U.S. Energy Administration cut its forecast for global oil-demand growth and prices this year, citing an uncertain economic outlook caused by the ongoing trade war.

The agency now expects U.S. WTI crude will drop nearly $7/bbl lower this year with global demand nearly 500K bbl/day lower than previously expected, the EIA said its Short-Term Energy Outlook.

WTI at Cushing, Oklahoma, is now expected to average $63.88/bbl in 2025, the EIA said, $6.80/bbl lower than its March forecast, and will decline further to $57.48/bbl in 2026, $7.49/bbl below the previous outlook, while issuing similar downside revisions to its Brent crude outlook, now forecasting $67.68/bbl in 2025 and $61.48/bbl in 2026.

EIA also guided global consumption of oil and liquid fuels to average 103.64M bbl/day in 2025, down by 490K bbl/day from its prior forecast, and sees consumption in 2026 at 104.68M bbl/day, lower by 620K bbl/day.

U.S. sanctions on Russia, Iran and Venezuela also "create additional uncertainty for crude oil prices," the EIA said.