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(Bloomberg) -- Oil slumped after Federal Reserve Chair Jerome Powell said officials aren’t in a hurry to adjust rates and as tensions between the US and China linger ahead of trade negotiations.

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West Texas Intermediate futures dipped 1.7% to settle near $58 a barrel as the Fed outlook and trade conflict weighed on the prospects for economic growth and energy demand. President Donald Trump said he’s unwilling to preemptively lower tariffs on China, the world’s largest crude importer, to kickstart substantive trade talks. The comments come a day before Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer are set to meet with Chinese officials.

In the US, the Federal Reserve held interest rates steady in their meeting Wednesday, and Powell said tariffs could lead to higher inflation and unemployment.

“There is a fear that the trade negotiations in Switzerland with China could backfire and turn into a demand destruction event,” said Robert Yawger, director of the energy futures division at Mizuho Securities USA. Market sentiment that a rate-cut isn’t coming anytime soon is also weighing on prices, he added.

Oil has trended lower since late January due to escalating trade frictions and plans by OPEC+ to keep boosting idled supply.

Also weighing on crude, Trump said the US would stop its bombing campaign against Houthis in Yemen after a ceasefire was facilitated by Oman. That followed earlier comments from Vice President JD Vance that a nuclear deal with Iran could see the OPEC member reintegrated into the global economy.

The decline in crude prices will likely lead to falling American shale output, according to Diamondback Energy Inc., the largest US independent oil producer in the Permian Basin. In another sign of the hit to output, the Energy Information Administration cut its forecast for US crude production this year for a second straight month.

--With assistance from Christopher Charleston.

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