Onome Amuge
Oil prices tumbled for a fifth consecutive session on Wednesday, hitting their lowest level since February 2021, as President Donald Trump’s latest tariffs on Chinese goods took effect, escalating fears of a global trade war and its potential impact on economic growth and fuel demand.
Brent futures for near-month delivery fell $2.10, or 3.34 percent, to $60.72 a barrel. US West Texas Intermediate (WTI) crude futures also saw significant losses, dropping $2.04, or 3.42 percent, to $57.54. Both benchmarks had earlier plumbed even lower levels, shedding as much as four percent before recovering slightly.
The sustained downward pressure on oil markets follows President Trump’s announcement of sweeping tariffs on a wide range of imports, raising concerns that the escalating trade tensions will dent global economic activity and consequently reduce demand for crude.
Ashley Kelty, an analyst at Panmure Liberum, noted that some US analysts believe the White House aims to push oil prices closer to $50 a barrel, under the assumption that the domestic oil and gas industry can withstand such a period.
However, Kelty dismissed this as “somewhat delusional,” arguing that it would likely lead to a shutdown in US production and allow OPEC to regain its role as the dominant swing producer.
Trump’s decision to impose a 104 percent duty on Chinese goods came into effect on Wednesday, marking a 50 percent increase in tariffs after Beijing failed to retract its retaliatory measures on US products. The European Union is also expected to approve its first countermeasures against Washington’s tariffs on Wednesday, joining China and Canada in their response.
The Chinese government has vowed not to yield to what it described as blackmail from the US, following Trump’s threat of additional tariffs if China did not withdraw its 34 percent levy on American goods.
Ye Lin, vice-president of oil commodity markets at Rystad Energy, warned that “China’s aggressive retaliation diminishes the chances of a quick deal between the world’s two biggest economies, triggering mounting fears of economic recession across the globe.
She added that “China’s 50,000 bpd to 100,000 bpd of oil demand growth is at risk if the trade war continues for longer, however, a stronger stimulus to boost domestic consumption could mitigate the losses.”
Adding to the bearish sentiment was the recent decision by OPEC+ to increase output by 411,000 barrels per day in May, a move analysts anticipate will likely push the oil market into a surplus.
Goldman Sachs has revised its price forecasts downwards, now predicting that Brent and WTI could decline to $62 and $58 per barrel by December 2025, and further to $55 and $51 per barrel by December 2026.
