Oil prices extended their decline Monday, sliding more than 3% as trade tensions between the U.S. and China escalated. Investors fled risk assets on fears that a full-blown economic downturn could depress global energy demand.
Brent crude dropped 2.15% to $64.17 per barrel, while U.S. West Texas Intermediate (WTI) fell 2.18% to $60.64—both hitting their lowest levels since April 2021.
The latest drop comes after oil plunged 7% on Friday, following China’s announcement of a 34% retaliatory tariff on U.S. goods. That move intensified fears that global trade could slow significantly, triggering a broader recession.
“The panic gripping markets leaves little support for crude,” said Vandana Hari, founder of Vanda Insights. “Unless we see decisive rhetoric from the White House to ease trade tensions, sentiment may deteriorate further.”
U.S.-China Tariffs Disrupt Market Stability
Trade-related headlines continue to dominate sentiment across commodities. On April 2, President Donald Trump unveiled sweeping tariffs of 10% to 49% on imports, aimed at China and the European Union.
China’s response came swiftly:
- 34% tariffs imposed on U.S. goods, effective immediately
- Signal of sustained long-term policy standoff
Although oil and refined product imports were excluded from the new tariffs, analysts warn that broader economic pain from protectionism could dampen demand.
Fed Chair Jerome Powell noted the tariffs are “larger than expected,” adding that rising inflation and slower growth are now expected side effects.
OPEC+ Output Shift Pressures Prices
Adding further pressure to prices, OPEC and its allies (OPEC+) announced plans to increase output by 411,000 barrels per day in May, up sharply from a previously planned 135,000 bpd.
This marks a significant reversal from the group’s conservative stance over the past two years, aimed at propping up prices through supply restrictions.
Other key developments:
- OPEC+ ministers emphasized compliance with quotas over the weekend
- Overproducing members face an April 15 deadline to present correction plans
- Potential oversupply looms as summer demand forecasts soften
In parallel, rising geopolitical tensions in Iran and Ukraine have added to the market’s risk premium. Iran rejected U.S. calls for nuclear talks, while Russia reported military advances in Ukraine’s Sumy region.
As trade, monetary, and geopolitical pressures converge, energy markets appear poised for continued volatility.