Oil Prices Decline to Lowest Levels Since 2021 as Trade War Intensifies

Oil prices experienced a significant decline on Wednesday, marking the fifth consecutive day of losses and reaching their lowest level since February 2021. This downturn follows the implementation of “reciprocal” tariffs by U.S. President Donald Trump, including a staggering 104% duty on Chinese imports, further intensifying the ongoing global trade war.

As of 9:35 a.m. GMT, Brent crude futures fell by $2.10, or 3.34%, settling at $60.72 per barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures decreased by $2.04, or 3.42%, to $57.54 per barrel. Both benchmarks experienced losses of up to 4% earlier in the session before recovering slightly.

The sharp decline in oil prices has been attributed to concerns surrounding the economic impact of the newly announced tariffs. Following Trump’s announcement of extensive tariffs on most imports, analysts have raised alarms about potential repercussions for economic growth and fuel demand.

Ashley Kelty, an analyst at Panmure Liberum, noted, “Some U.S. analysts suggest that the White House aims to drive oil prices toward $50, believing that the U.S. oil and gas industry can endure a period of disruption. However, we see this perspective as somewhat delusional, as it may lead to reduced U.S. production and allow OPEC to regain its influence as the swing producer.”

The tariffs on Chinese goods took effect at 12:01 a.m. EDT (4:01 a.m. GMT) on Wednesday, augmenting existing tariffs after Beijing opted to maintain its retaliatory tariffs on U.S. products. Additionally, the European Union is expected to implement countermeasures against Trump’s tariffs, joining China and Canada in their responses.

Amid these developments, Beijing has vowed to resist U.S. pressure following Trump’s threat of an additional 50% tariff on Chinese imports unless the country lifts its existing 34% retaliatory levy. Ye Lin, Vice President of Oil Commodity Markets at Rystad Energy, stated, “China’s aggressive retaliation reduces the likelihood of a swift resolution between the world’s two largest economies, raising concerns about a potential global economic recession.”

Lin further emphasized that China’s projected oil demand growth of 50,000 to 100,000 barrels per day could be jeopardized if the trade war persists; however, a robust domestic stimulus could help mitigate potential losses.

In a reciprocal response, China announced an additional 50% tariff on U.S. imports, matching Trump’s hike. This adjustment increases the total tariff on U.S. goods to 84% starting Thursday.

Adding to the downward pressure on oil prices, OPEC+—comprising the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia—recently decided to raise production by 411,000 barrels per day in May. Analysts predict this move could lead to a market surplus.

Goldman Sachs has revised its forecasts, projecting that Brent and WTI prices may decline to $62 and $58 per barrel by December 2025, and further to $55 and $51 per barrel by December 2026.

In a notable development, Russia’s ESPO Blend oil price fell below the $60 per barrel Western price cap for the first time on Monday.

Despite the overall decline in oil prices, there was a positive indicator for demand. Data from the American Petroleum Institute revealed that U.S. crude inventories decreased by 1.1 million barrels during the week ending April 4, contrasting with a Reuters poll that anticipated a build of approximately 1.4 million barrels.