Oil prices extended losses, reaching their lowest levels in nearly three months, as the Trump administration’s tariffs on key trading partners, including China, took effect. Brent crude fell toward $71 a barrel after a 1.6% drop on Monday, while West Texas Intermediate (WTI) hovered around $68. The move triggered a swift response from Beijing, which imposed retaliatory tariffs on US agricultural exports, heightening concerns about a prolonged trade war. Additionally, tariffs on Canada and Mexico were also implemented on Tuesday.
The decline in oil prices came after OPEC+ announced plans to increase production in April, following several delays. However, the increase, which could add 138,000 barrels per day, might be paused or reversed depending on market conditions. This development further pressured the market as traders anticipated a potential oversupply.
According to the International Energy Agency (IEA), global oil markets could face a supply surplus this year, even if OPEC+ keeps production unchanged. The cartel, led by Saudi Arabia and Russia, faces mounting concerns over demand and the broader impact of President Trump’s trade policies. Tariffs on Chinese exports were raised to 20%, and the majority of goods the US imports from Canada and Mexico are now subject to a 25% tariff. Canadian crude is particularly affected, facing a 10% duty.
Warren Patterson, head of commodities strategy at ING Groep in Singapore, noted that oil prices are under pressure from both increased supply and escalating trade tensions. “The retaliatory tariffs indicate further escalation, which will only cloud the growth and demand outlook,” Patterson said.
As the global market adjusts to these developments, the outlook for oil prices remains uncertain, with a balancing act between production levels and trade-related disruptions.
Related topic:
Is Crude Oil Futures Profitable?
