Oil prices fell to a near three-month low on Tuesday, driven by escalating worries about economic disruptions stemming from higher U.S. trade tariffs, while the potential for increased OPEC+ production also contributed to the downward pressure.
Oil found scant relief this week after experiencing a sharp decline due to the looming threat of a deteriorating trade war between the world’s largest economies. The outlook for increased economic strain on China—the world’s largest oil importer—also weighed heavily on markets, particularly after U.S. President Donald Trump raised tariffs against the nation to 20 percent.
Supply fears compound the situation
These worries were intensified by concerns about rising supply, as the Organization of Petroleum Exporting Countries and allies (OPEC+) announced plans to boost output in April. Market jitters regarding trade and supply led investors to largely overlook signs of a possible escalation in the Russia-Ukraine conflict, especially after the U.S. halted all military assistance to Ukraine on Monday.
Brent oil futures set to expire in May decreased by 0.8 percent to $71.07 a barrel, while West Texas Intermediate crude futures dropped by 0.9 percent to $67.64 a barrel by 20:40 ET (01:40 GMT).
Read more: Oil prices gain 0.25 percent on positive Chinese manufacturing data
Trump tariffs disrupt financial markets
On Monday, Trump announced an increase in tariffs against China to 20 percent, while confirming that existing 25 percent tariffs on Canada and Mexico would also continue, with all three duties scheduled to take effect later on Tuesday.
The announcement of these tariffs led to significant losses across financial markets, with oil prices also feeling the impact. Investors were concerned that disruptions in global trade could hinder economic growth, thereby adversely affecting oil demand. Trump’s tariffs on China have been a critical concern for oil markets, as they pose additional economic challenges for the world’s leading oil importer. China is also anticipated to respond with its own trade measures, potentially escalating the trade conflict with the U.S.
OPEC+ confirms production increase in April
OPEC+ indicated on Monday that it would proceed with a planned increase in oil output in April, responding to Trump’s pressure to ramp up production and lower prices. The expected rise in OPEC+ production suggests a less constricted oil market in the upcoming months, which could further depress oil prices.
This announcement occurs against a backdrop of waning oil demand globally, as several major economies struggle with sluggish growth, persistent inflation, and declining consumer sentiment. Nonetheless, the initial production increases from OPEC+ are projected to be modest—approximately 138,000 barrels per day—representing only a small fraction of the 5.8 million barrels per day that the cartel has cut since 2022.
