Crude oil prices plummet 2%, hitting a two-week low, due to escalating trade war apprehensions that diminish future demand expectations.
Oil Prices Plummet: OPEC+ Output Hike and Trade Wars Take Center Stage
NEW YORK: Uncertainty looms large over the oil market, as prices plunged nearly 2% to their lowest point in two weeks on Tuesday. This slide can be attributed to the expectancy that OPEC+ will augment output, even as Donald Trump's trade tariffs remain a thorn in the side of global economic growth and oil demand.
Brent crude futures dipped by $1.41, or 2.1%, to a paltry $64.45 per barrel by 11:03 a.m. EDT (1503 GMT), while U.S. West Texas Intermediate crude descended by $1.36, or 2.2%, to $60.69. Should these trends persist, both benchmarks could be poised for their lowest closes since April 10.
Trump's fervent pursuit of reshaping international trade via punitive tariffs on imports gives rise to the possibility that the global economy could spiral into a recession this year, as per a majority of economists questioned in a Reuters survey. China, mere recipient of the steepest tariffs, has not hesitated to retaliate with its own impositions on U.S. imports, feeding into a trade war between the world's top two oil-guzzling nations. This heated exchange has stirred analysts to significantly shrink their oil demand and price forecasts.
"Tumbling trade negotiations between China and the U.S. heighten anxiety levels once again on economic and demand growth prospects," said Tamas Varga, an analyst at PVM, a brokerage and consulting firm. "It's unclear whether the two leaders have even spoken to one another," he added.
The U.S. merchandise trade deficit soared to a record high in March, as companies bombarded the market with goods ahead of Trump's extensive tariffs.
Rising Production, Plunging Prices
A motley crew of OPEC+ members is contemplating an escalation in output hikes for a second consecutive month in June, according to confidential sources apprised by Reuters. But as sentiment remains fragile, and with Kazakhstan reluctant to decrease its production, this swift increase in supply could not have come at a worse time.
"Given the weak market sentiment, another production hike from OPEC+ couldn't be more ill-timed," said Saxo Bank analyst Ole Hansen.
OPEC+ associate Kazakhstan increased oil exports by 7% year-on-year during January-March, thanks to a boost in supply via the Caspian pipeline.
U.S. Oil Stocks and Inventories
Crucial inventory data from the American Petroleum Institute trade group and the U.S. EIA will be released on Tuesday and Wednesday, respectively. Analysts suspect that energy companies added approximately 0.5 million barrels of oil to U.S. stockpiles during the week ended April 25. If this estimate is accurate, it would mark the fifth consecutive weekly accumulation and contrast with an increase of 7.3 million barrels during the same week last year, as well as an average build of 3.2 million barrels over the past five years (2020-2024).
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*Oil Prices: Tanked due to OPEC+ Production Hike and U.S.-China Trade Wars*
In the midst of OPEC+'s decision to significantly boost oil production and the ongoing U.S.-China trade tariffs, oil prices plummeted. Here's a closer examination of these factors and their repercussions:
Effects of OPEC+ Production Increase
- OPEC+ Production Push: In April 2025, OPEC+ voted in favor of augmenting oil production by 411,000 barrels per day in May, surpassing market expectations and triggering a drop in crude oil prices by about 6%.
- Impact on the Market: A rise in production typically leads to a decrease in prices, especially when demand growth is uncertain. As OPEC+ continued to stress its potential to reverse these hikes based on market conditions, they aimed to ensure stability in the oil market.
- Adaptability: In the event of changes in global demand or supply disruptions, flexibility in production allows OPEC+ to readjust accordingly.
Impact of U.S.-China Trade Tariffs
- Trade Worries: Trump's announcement of reciprocal tariffs intensified doubts in the oil market. Protracted trade tensions between significant economies, like the U.S. and China, can lead to slower economic growth, which can in turn dampen oil demand and drive prices down.
- Broader Economic Concerns: Trade barriers not only affect the energy sector by shaping oil prices, but they also foster broader economic uncertainty. This can cause declines in investment and overall economic contraction, contributing to reduced oil demand and prices.
Combined Results on Oil Prices
The simultaneous greasing of the skids by OPEC+ and the ongoing economic uncertainty stemming from U.S.-China trade tariffs have resulted in profound volatility in oil prices. While higher production increases the supply and tends to lower prices, economic strife can lead to reduced demand and further price declines. These factors create a complex environment for oil price stability.
Prospects
- Production Levels Assessment: OPEC+ will gather on May 5 to deliberate over production levels for June, providing them with an opportunity to reassess market dynamics and make adjustments as needed.
- Economic Policies: Any alterations in trade policies or economic stimuli could affect oil demand and supply dynamics, subsequently impacting prices.
- Adaptability: As markets continue evolving, both OPEC+ and global economic factors will remain crucial in determining oil prices in the following months.
- The defi of oil prices plummeted due to a potential OPEC+ output hike and trade wars.
- The OPEC+ output hike could lead to increased growth in oil supply and a decrease in prices.
- Trade wars between major economies like the US and China can foster economic uncertainty, potentially causing reduced oil demand and prices.
- Analysts predict that if Trump's tariffs persist, there could be a general-news of a recession in the industry in 2023.
- During January-March, Kazakhstan, an OPEC+ associate, increased oil exports by 7%, thanks to a boost in supply and tariffs.
- The steepest tariffs were imposed on China, which has retaliated with its own impositions on US imports as part of war-and-conflicts in the trade sector.
- Forests of oil analysts have significantly shrunk their price and demand forecasts as a consequence of the trade wars.
- In May 2025, OPEC+ voted to augment oil production by 411,000 barrels per day, causing prices to tank by around 6%. This decision came despite the stormy waters of the ongoing US-China trade conflict.
