Oil Prices Decline Amid U.S.-China Trade Tensions and Recession Fears
Oil prices plunged around 2% due to escalating U.S.-China trade tensions, signaling potential recession fears. Brent futures fell to $64.41 and WTI to $60.82 per barrel. OPEC is set to increase oil supply amid these declines, emphasizing the implications of tariff policies on oil demand.
Oil prices experienced a significant decline on Monday, dropping approximately 2% due to mounting trade tensions between the United States and China. This escalation has raised concerns about a potential recession that may diminish oil demand, alongside OPEC’s preparation to increase supply. At 1303 GMT, Brent crude futures were down $1.17, or 1.78%, trading at $64.41 per barrel, while U.S. West Texas Intermediate crude futures saw a similar decline, also down $1.17, or 1.89%, at $60.82.
The intra-day lows for both Brent and WTI benchmarks reached $62.51 and $58.95 respectively, marking their lowest points since April 2021. Oil prices plunged by 7% on Friday after China imposed new tariffs on U.S. imports, intensifying the trade conflict and prompting investors to consider a higher risk of economic recession. For the previous week, Brent and WTI recorded losses of 10.9% and 10.6%, respectively.
Harry Tchilinguirian from Onyx Capital Group remarked, “The uncertainty around tariff policy – that’s still very present. You have a number of Wall Street banks slashing economic prospects and calling out much greater probabilities of recession.” On Monday, Goldman Sachs estimated a 45% chance of a U.S. recession within the next year, adjusting its oil price forecasts downwards. Financial institutions like Citi and Morgan Stanley have similarly reduced their Brent price projections, while JPMorgan assessed a 60% probability of a recession both in the U.S. and worldwide.
On Sunday, Saudi Arabia notably reduced crude oil prices for Asian purchasers, bringing May prices to their lowest level in four months. PVM analyst Tamas Varga stated, “It’s a demonstration of the belief that tariffs will hurt oil demand,” indicating that the Saudis anticipate changes in the supply-demand equilibrium requiring price reductions.
In retaliation to tariffs imposed by U.S. President Donald Trump, China declared additional levies of 34% on American products, confirming fears of an escalating global trade war. Although oil, gas, and refined products were exempt from these tariffs, such policies may incite inflation, hinder economic growth, and exacerbate trade conflicts, thereby influencing oil price dynamics.
Compounding the downward pressure, OPEC, along with its collaborating allies, announced premature plans to enhance output. The group aims to restore an additional 411,000 barrels per day to the market by May, a substantial increase from the originally scheduled 135,000 bpd. During their weekend meeting, OPEC ministers stressed the importance of adhering to oil output targets, urging over-producers to submit corrective plans by April 15.
The decline in oil prices reflects growing concerns over U.S.-China trade relations and recession fears. Major financial institutions have revised their outlooks on both the economy and oil prices, indicating a significant risk of downturn. OPEC’s message of increased output further complicates the market landscape, suggesting that supply will outpace demand amidst these tensions. As tariff policies evolve, their broader implications for the global economy and oil demand remain to be fully realized.
Original Source: www.livemint.com
Post Comment