[WORLD] Oil prices fell more than $1 per barrel on Tuesday, reaching a four-year low, as investors priced in a growing risk of a recession due to the escalating trade conflict between the United States and China, the world's two largest economies.
Brent futures fell $1.39, or 2.16%, to $62.82 per barrel. US West Texas Intermediate oil futures fell $1.12, or 1.85%, to $59.58. Since US President Donald Trump announced tariffs on all US imports on April 2, the two benchmarks have fallen 16%.
The downturn reflects broader market anxieties, with analysts noting that oil is particularly sensitive to trade tensions due to its role as a barometer of global economic health. A prolonged standoff between Washington and Beijing could further depress industrial activity, reducing demand for energy across manufacturing and transportation sectors.
According to a White House official, the US will slap a 104% tax on China beginning at 12:01 a.m. EDT (0401 GMT) on Wednesday, adding 50% more duties after Beijing failed to reduce its retaliatory tariffs on US imports by Tuesday's noon deadline.
Beijing vowed not to succumb to what it called US coercion after Trump threatened to impose an additional 50% tax on Chinese exports if the nation did not reduce its 34% retaliatory levy. China's Commerce Ministry vowed the country would battle until the end, raising concerns about a global economic downturn.
The stalemate has also raised concerns about supply chain disruptions, particularly for crude and refined products. China, the world’s largest oil importer, could slow purchases in response to tariffs, exacerbating the current oversupply in global markets. This comes as OPEC+ members grapple with their own production cuts, adding another layer of volatility to price forecasts.
Following the settlement, both oil benchmarks fell further. US crude futures fell to $57.88, as US stock indices fell broadly. "The scenario has presented a case for a global recession, where fears of declining energy demand have emerged," Alex Hodes, director of market strategy at financial services firm StoneX, stated in a note.
Meanwhile, the International Energy Agency (IEA) warned that the trade war could shave 0.5% off global GDP growth this year, further dampening oil demand projections. The IEA’s latest monthly report highlighted weakening consumption in Europe and Asia, compounding pressures on exporters already struggling with subdued prices.
US Trade Representative Jamieson Greer told US senators on Tuesday that China has not expressed a desire to work toward trade reciprocity. Goldman Sachs predicted that Brent and WTI crude prices will reach US62 and US58 a barrel, respectively, by December 2025, and US55 and US55 and US51 a year later, under various scenarios.
According to Natasha Kaneva, head of global commodities strategy at J.P. Morgan, the US government has shown a strong preference for lowering crude prices to $50 or lower, ranking it as one of its top priorities.
Energy analysts suggest that the administration’s stance may also be aimed at curbing inflation ahead of the 2024 election, as lower fuel costs could ease consumer price pressures. However, the strategy risks backlash from US shale producers, who have already begun scaling back drilling activity in response to falling margins.
On Monday, Trump also made a surprising declaration that the US and Iran will begin direct talks on Tehran's nuclear program, but Iran's foreign minister insisted the negotiations would be indirect.
US Energy Secretary Chris Wright warned on Tuesday that Iran may anticipate tougher penalties if it does not reach an agreement with Trump on its nuclear program.
"So absolutely, I would expect very tight sanctions on Iran, and hopefully drive them to abandon their nuclear programme," Wright said in an interview. Meanwhile, US oil and distillate inventories declined last week, while gasoline stocks increased, according to market sources, citing American Petroleum Institute data released Tuesday.
Crude stocks declined by 1.1 million barrels in the week ending April 4, according to sources who spoke on condition of anonymity. Gasoline inventories increased by 210,000 barrels, while distillate stocks declined by 1.8 million barrels, they reported. Official weekly oil inventory data from the Energy Information Administration is coming on Wednesday.
WhatsApp
Instagram
Threads
