Global Trade Tensions Drive Oil Prices to New Lows

Image Credit: Reuters

Oil prices dropped by over 3% on Monday, extending last week's losses, as rising trade tensions between the U.S. and China fueled concerns of a recession that could reduce oil demand.

Brent futures fell by $2.28, or 3.5%, to $63.30 per barrel, while U.S. West Texas Intermediate (WTI) crude futures declined by $2.20, or 3.6%, to $59.79. At their lowest point during the session, both benchmarks reached their lowest levels since April 2021. Oil prices had already plunged 7% on Friday as China increased tariffs on U.S. goods, further escalating the trade war and heightening recession fears. Over the past week, Brent lost 10.9%, and WTI dropped 10.6%.

"The main factor behind the decline is concern that tariffs will harm the global economy," said Satoru Yoshida, a commodity analyst at Rakuten Securities.

He also noted that an upcoming production increase by OPEC+ is adding to the selling pressure. Yoshida warned that WTI could fall to $55 or even $50 if stock market declines continue.

In response to U.S. tariffs, China announced additional levies of 34% on American goods, fueling investor fears of a full-scale global trade war and the potential for a global recession.

While imports of oil, gas, and refined products are exempt from Trump's new tariffs, the broader policy could drive inflation, slow growth, and worsen trade conflicts, all of which would put further pressure on oil prices.

Federal Reserve Chair Jerome Powell noted on Friday that the tariffs were "larger than expected" and that the resulting economic effects, including higher inflation and slower growth, could be significant.

Over the weekend, key OPEC+ ministers emphasized the importance of adhering to oil production targets and called for overproducing nations to submit plans by April 15 to make up for excess production.

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author