Global oil prices have dropped to their lowest levels since February 2021. This is due to newly imposed trade tariffs under US President Donald Trump. The tariffs, effective from 12:01 AM EDT (0401 GMT), have sparked global trade tensions. Concerns about future global fuel demand are growing as markets react to these developments. Both Brent Crude and US West Texas Intermediate (WTI) crude saw significant declines.
Impact of Trade Tariffs on Oil Prices
Brent crude futures fell by $2.1, or 3.34%, to $60.72 per barrel. Meanwhile, WTI crude dropped $2.04, or 3.42%, to $57.54. This marks the fifth consecutive day of falling prices. The tariffs include a 104% levy on Chinese imports. This is part of broader trade disputes between the US and its major partners.
Analysts are concerned that these tensions will harm global industrial output and energy consumption. If diplomatic efforts fail, demand for oil and other energy resources may weaken. This raises fears about the stability of the oil market in the long term.
Responses from Russia and OPEC+
Russia’s ESPO Blend crude also fell below the G7-led price cap of $60 per barrel. This raises questions about Russia’s export policy and the enforcement of the cap. Meanwhile, OPEC+, a coalition of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, plans to increase oil production by 411,000 barrels per day in May. This could lead to a surplus and further pressure on oil prices.
Goldman Sachs revised its oil price forecast. It now predicts that Brent crude will fall to $62 per barrel by December 2025. WTI prices are expected to drop to $58 by the end of 2025.
Global Retaliation and Geopolitical Tensions
The US’s tariff strategy has led to retaliatory actions from global players. The European Union is preparing countermeasures, joining Canada and China. China has already imposed a 34% retaliatory tariff and refuses to reverse it. In response, the Trump administration plans an additional 50% duty on selected Chinese products.
These developments raise fears of a prolonged trade conflict, which could lead to a global economic recession. Ye Lin, vice president of oil commodity markets at Rystad Energy, warned that the ongoing tensions could delay any deal between the US and China. If the conflict continues, China’s oil demand growth may be affected. However, domestic stimulus measures may offset some of this impact.
Market Outlook
The ongoing trade conflict, rising oil production, and weakening demand are expected to continue putting downward pressure on oil prices. Analysts believe that the global oil market may struggle to stabilize unless diplomatic solutions are reached. As prices continue to decline, the future of US oil producers remains uncertain. OPEC may regain its role as the swing producer.
For now, the oil industry faces an uncertain future. Geopolitical tensions, trade tariffs, and changes in supply will influence market dynamics. The next few months will be crucial in determining the long-term trajectory of oil prices.
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