Oil futures plummeted to multiyear lows on Friday following China’s retaliatory actions against U.S. tariffs imposed by the administration of President Donald Trump. This escalation intensified fears of a substantial decline in demand amid a burgeoning trade war. West Texas Intermediate (WTI), the U.S. oil benchmark, experienced a significant drop of over 7%, closing at $61.99 per barrel. Meanwhile, Brent crude futures fell more than 6%, settling at $65.58 per barrel. The last instance of crude trading at such low levels was recorded in 2021.
China’s announcement of additional 34% tariffs on U.S. goods in response to President Trump’s latest tariff measures, unveiled on Wednesday, further deepened the losses. These measures, which include increased duties on imports from China, sent shockwaves through financial markets, causing crude prices to tumble over 6% on Thursday as traders evaluated the trade war’s potential impact on demand.
“Should these tariffs remain, they could significantly hinder both U.S. and global economic growth, potentially pushing economies into a recession this year,” remarked Natasha Kaneva of JPMorgan on Friday morning. Energy-related equities appeared poised to sustain further losses after leading the market’s downturn on Thursday, with notable sell-offs observed in the Dow, S&P 500, and Nasdaq indices.
Crude losses intensified on Thursday following the Organization of Petroleum Exporting Countries and its allies, known as OPEC+, agreeing to increase supply by approximately three times more than anticipated, starting in May. “While markets are still processing the tariff implications, the combined effect of heightened oil production and a weaker global economic outlook is exerting downward pressure on oil prices, potentially signaling the onset of a new volatile market phase,” stated Angie Gildea, KPMG US energy leader, on Thursday morning.
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Although energy products were exempt from the tariffs announced on Wednesday, the escalation of President Trump’s global trade war poses a threat to oil demand. Goldman Sachs analysts, in a Thursday evening note to clients, revised down their oil price forecast for 2025. “We are lowering our December 2025 Brent and WTI forecasts by $5 to $66 and $62, respectively, as two primary downside risks—tariff escalation and slightly increased OPEC+ supply—are materializing,” the analysts conveyed.
The Bigger Picture
- The escalation of the U.S.-China trade war could lead to increased prices on various goods, affecting daily expenses for households.
- The potential slowdown in global economic growth might impact job stability and availability, especially in sectors dependent on international trade.
- Lower oil prices could result in reduced revenue for oil-dependent regions and states, potentially affecting public services and infrastructure investments.
- Investors should remain cautious and keep an eye on market volatility, as fluctuations in oil prices could influence stock market dynamics.
- The evolving trade landscape might encourage local businesses to adapt their strategies, considering alternate markets and diversifying supply chains.
