Oil prices plunged to their lowest levels in more than three years on Friday, as China hit back against President Donald Trump's tariffs with its own additional levies on US goods and Opec+'s surprise decision to boost oil supply added to the heavy selling.
Brent, the benchmark for two thirds of the world’s oil, was down 6.5 per cent at $65.58 a barrel at the market close on Friday. West Texas Intermediate, the gauge that tracks US crude, was 7.4 per cent lower at $61.99 a barrel.
On a weekly basis, Brent was down 10.9 per cent, its biggest weekly loss in percentage terms in a year and a half, while WTI posted its biggest drop in two years with a decline of 10.6 per cent.
The declines were worsened on Friday by China’s retaliation against the US tariffs, as the world's biggest oil importer reacted with a 34 per cent tariff on all imports from the US starting from April 10.
"China’s aggressive countermove to US tariffs, announcing their own 34 per cent duties on US goods, with Europe likely to follow soon, all but confirms we are heading towards a global trade war—a war that has no winners, and which will hurt economic growth and, with that, demand for key commodities such as crude oil and refined products," Ole Hansen, head of commodity strategy at Saxo Bank, said in a note on Friday.
"At this stage, we have not only entered a demand destruction phase, but also supply destruction from high-cost producers, which over time will help cushion the fall."
US tariffs and the Opec+ alliance unwinding their production cuts faster in May have pushed oil prices down to the lowest level since August 2021.
"With financial markets in panic mode, oil prices are likely to stay volatile in the near term," Giovanni Staunovo, strategist at UBS Switzerland, said. "But we retain our constructive outlook, as the oil market is undersupplied and demand growth remains healthy."
On Friday, US Federal Reserve chairman Jerome Powell warned that President Donald Trump's larger-than-expected tariffs could drive up inflation and weaken economic growth, but maintained that the central bank is not rushing to cut interest rates.
On Wednesday, US President Donald Trump announced sweeping tariff measures on America's trading partners, prompting world leaders to consider retaliatory steps and raising the risk of trade wars that could hinder global economic growth.
The minimum 10 per cent tariffs on all imports were established through an executive order, with Mr Trump saying the action will be imposed on “friend and foe alike” because, “in many cases, the friend is worse than the foe in terms of trade”.
“Oil and gas imports to the US have been exempted from the new round of tariffs. That said, global energy consumption is likely to take a hit if the global economy slips into a recession,” BMI, a Fitch Solutions company, said in a research note on Thursday.
“For oil, this would be exacerbated by supply additions from Opec+ and non-Opec producers that are forecast for 2025.”
On Thursday, the Opec+ alliance of oil-producing countries agreed to a larger-than-expected supply increase next month. The group, which includes Saudi Arabia and Russia, will add 411,000 barrels per day (bpd) to the market next month, rather than the previously planned 137,000 bpd.
“In view of the continuing healthy market fundamentals and the positive market outlook … the eight participating countries will implement a production adjustment of 411,000 bpd, equivalent to three monthly increments, in May 2025,” an Opec statement read.
Norway-based consultancy Rystad Energy expects the recent price slide to be short-lived, cushioned by summer demand and continuing geopolitical risks.
"At the same time, there’s a clear signal from Opec+ to uphold compliance and avoid a surplus that could threaten the market’s current backwardation structure," said Mukesh Sahdev, global head of commodity markets and oil at Rystad Energy.
"Future actions will likely hinge on how US sanctions, tariffs or military tensions unfold.”
Asian markets extend losses
Asian stocks extended losses on Friday, falling to the lowest level in two months, as fears of a global recession deepened after Mr Trump announced sweeping trade tariffs.
Japan’s exporter-heavy Nikkei 225 Stock Average closed 2.8 per cent down, while South Korea's Kospi index lost 0.9 per cent and Australia’s S&P/ASX 200 slid 2.4 per cent.
Stock markets in China, Hong Kong, Indonesia and Taiwan were closed on Friday due to respective public holidays.
In Europe, Germany’s DAX fell 4.38 per cent, France’s CAC index shed 3.97 per cent and Britain’s FTSE index dropped 3.8 per cent.
In pre-market trading in the US, futures tied to the Dow Jones Industrial Average fell 2.87 per cent. S&P 500 futures fell 2.89 per cent while Nasdaq futures were down 3.05 per cent.
The Wall Street on Thursday suffered its steepest decline since 2020 as the US President’s sweeping tariffs spooked investors of a global trade war and a weakening American economy.
The S&P 500 sank 4.9 per cent and the Nasdaq 100 plunged 5.5 per cent on April 3, the biggest drop since 2020 for each, wiping around $2.5 trillion from the US stock market.
"Yesterday saw the worst sell-off since the pandemic. Equity markets gave a strong reaction to Trump’s tariff nonsense ... Apple, Amazon, Nvidia, Microsoft, Tesla lost tens and for some hundreds of billions in market cap. Companies that have complex worldwide supply chains like Gap, H&M and Dell saw heavy losses, as well," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
"The global economy has now entered a dark tunnel. No one knows what’s next."
