Oil prices fell more than 1.5 percent on Monday as investors turned their attention back to concerns that U.S. tariffs on trading partners will generate economic headwinds, ultimately reducing fuel demand growth. Brent crude futures dropped by $1.10, or 1.6 percent, to $66.86 a barrel at 02:55 GMT, following a 3.2 percent increase on Thursday. Meanwhile, U.S. West Texas Intermediate crude was priced at $63.57 a barrel, down $1.11, or 1.7 percent, after settling up 3.54 percent in the previous session. Thursday marked the last settlement day of the week due to the Good Friday holiday.
Broader trend remains downward
“The broader trend remains tilted to the downside, as investors may struggle to find conviction in an improving supply-demand outlook, especially amid the drag from tariffs on global growth and rising supplies from OPEC+,” reported Reuters, citing IG market strategist Yeap Jun Rong. OPEC+, which includes major producers like the Organization of the Petroleum Exporting Countries and allies such as Russia, is still anticipated to increase output by 411,000 barrels per day starting in May. However, some of this increase may be mitigated by cuts from countries exceeding their quotas.
Eased supply concerns from nuclear talks
Prices also fell as supply worries eased, following signs of progress in nuclear negotiations between the United States and Iran. In these discussions, the U.S. and Iran agreed to begin formulating a framework for a potential nuclear deal, according to Iran’s foreign minister, after talks that a U.S. official described as yielding “very good progress.” This progress comes after the U.S. imposed further sanctions last week on a Chinese independent oil refinery accused of processing Iranian crude, intensifying pressure on Tehran amid the negotiations.
Market reactions to tariff policies
Concerns about tightening Iranian oil supply, coupled with hopes for a trade deal between the United States and the European Union, contributed to Brent and WTI prices rising approximately 5 percent last week, marking their first weekly gain in three weeks. Nevertheless, markets remain anxious about the ramifications of aggressive U.S. tariff policies and its ongoing trade war with China, as the dollar and Asian equity markets fell on Monday.
Investor sentiment on economic slowdown
A Reuters poll conducted on April 17 indicated that investors believe the tariff policy will trigger a significant slowdown in the U.S. economy this year and next, with the median probability of a recession within the next 12 months nearing 50 percent. Given that the U.S. is the world’s largest oil consumer, this sentiment is particularly concerning.
Upcoming U.S. data releases
Investors are closely monitoring several U.S. data releases this week, including April’s flash manufacturing and services PMI, for insights into the economy’s direction. “This week’s series of PMI releases could further underscore the economic impact of tariffs, with both manufacturing and services conditions across major economies expected to soften,” Yeap stated, adding that oil prices face resistance at the $70 level.
