Oil prices slide as trade war sparks recession fears and OPEC+ boosts supply

[WORLD] Oil prices fell nearly 2% on Monday as rising trade tensions between the United States and China fueled fears of a recession, which would cut demand for oil, while OPEC+ prepared to raise production.

Brent prices fell $1.17, or 1.78%, to $64.41 per barrel at 1303 GMT, while U.S. West Texas Intermediate crude futures down $1.17, or 1.89%, to $60.82. Brent and WTI benchmarks hit intra-day lows of $62.51 and $58.95, respectively, marking their lowest levels since April 2021.

The latest downturn reflects broader market anxieties, with commodities across the board—from copper to soybeans—facing pressure as investors flee risk assets. Analysts note that oil, often seen as a barometer for global economic health, is particularly vulnerable to shifts in trade policy and growth expectations. This has led to heightened volatility in energy markets, with trading volumes spiking as hedge funds and speculators adjust their positions.

Oil fell 7% on Friday as China raised tariffs on US exports, deepening a trade conflict that has caused investors to price in a larger risk of recession. Last week, Brent and WTI fell 10.9% and 10.6%, respectively.

The sell-off has also been exacerbated by a stronger U.S. dollar, which has gained ground as investors seek safe-haven assets. A stronger dollar typically makes oil more expensive for holders of other currencies, further dampening demand. Meanwhile, U.S. crude inventories have shown signs of swelling, adding to concerns about oversupply even as geopolitical risks—such as potential disruptions in the Middle East—remain a wildcard for the market.

"The uncertainty surrounding tariff policy is still extremely present. You have a number of Wall Street banks slashing economic prospects and predicting much higher rates of recession," said Harry Tchilinguirian of Onyx Capital Group. "That's really what's driving sentiment."

Goldman Sachs predicted a 45% possibility of a recession in the United States over the next year and revised its oil price forecasts downward. Citi and Morgan Stanley also lowered their Brent forecasts. Last Monday, JPMorgan predicted a 60% chance of a recession in the United States and around the world.

Market watchers are now closely monitoring upcoming economic data, including U.S. jobs reports and manufacturing activity figures, for further clues on the health of the global economy. Any signs of weakening demand could prompt another wave of downward revisions to oil price forecasts, particularly if the U.S.-China trade standoff shows no signs of resolution in the near term.

Saudi Arabia announced dramatic reduction in crude oil prices for Asian importers on Sunday, bringing the price in May to its lowest level in four months. "It's a demonstration of the belief that tariffs will hurt oil demand," says PVM analyst Tamas Varga. "It goes to show the Saudis, just like every man and his dog, expect the supply and demand balance to be affected and they are forced to cut their official selling prices."

In response to US President Donald Trump's duties, China announced on Friday that it will apply further 34% levies on American imports, confirming investor worries that a full-fledged global trade war had begun.

Imports of oil, gas, and refined products have been excluded from Trump's sweeping new tariffs, but the policies may boost inflation, limit economic growth, and exacerbate trade disputes, putting pressure on oil prices.

Beyond trade tensions, the energy sector is also grappling with shifting dynamics in production. U.S. shale output continues to hover near record highs, adding to global supply even as OPEC+ attempts to calibrate its strategy. Some analysts suggest that without deeper cuts from major producers, the market could face a prolonged period of oversupply, keeping prices subdued well into the second half of the year.

Adding to the downward momentum, the OPEC+ group, which includes the Organization of Petroleum Exporting Countries and its allies, opted to move on with plans to boost output. The firm now plans to restore 411,000 barrels per day to the market in May, up from 135,000 bpd earlier.

Over the weekend, OPEC+ ministers stressed the importance of full compliance with oil output quotas and urged over-producers to submit plans by April 15 to compensate for pumping too much.