KEY POINTS
- Oil prices fell after OPEC+ confirmed a production increase.
- U.S. tariffs and China’s response added pressure to global markets.
- Trump’s pause on Ukraine aid raised concerns over Russian oil supplies.
Oil prices dropped to their lowest level in six months on Tuesday following reports that OPEC+ will proceed with a planned April output increase. The decision, which comes amid global trade tensions, caught markets off guard.
The Organization of the Petroleum Exporting Countries, along with allies including Russia, announced it would add 138,000 barrels per day, marking its first production increase since 2022.
Analysts suggest the move signals a shift in OPEC’s strategy, possibly influenced by political factors. Bjarne Schieldrop, chief commodities analyst at SEB, noted,
“The change in OPEC’s strategy suggests they are prioritizing politics over price. This is likely linked to ongoing negotiations with Washington.”
The market faces additional pressure as President Donald Trump seeks reduced oil prices at a time when the United States implements trade tariffs targeting Mexico, Canada and China.
According to Reuters, the combination of rising supply and international trade conflicts has boosted the downward pressure on crude prices.
U.S. tariffs and China’s response shake markets
The U.S. launched trade policy changes that applied 25 percent tariffs on Mexican and Canadian imports, starting Tuesday including a 10 percent tariffs on Canadian energy exports.
Meanwhile, China conducted retaliatory actions by increasing import tariffs between 10 to 15 percent for U.S. agricultural and food products.
These new trade restrictions have generated market instability due to predictions that the reduced economic activity will lower oil consumption levels.
“The impact of the tariffs on energy markets is still uncertain, but they could dampen demand as businesses adjust to higher costs,” said Darren Lim, commodities strategist at Phillip Nova.
At 1:03 p.m. EST (1803 GMT), Brent crude was down 75 cents, or 1 percent, at $70.87 per barrel, with prices briefly dipping to $69.75, the lowest since September 2024.
West Texas Intermediate (WTI) crude fell 28 cents, or 0.4 percent, to $68.09, having earlier hit $66.77, its lowest point since November 2024.
Ukraine aid pause and Russian oil sanctions
The volatility of oil prices became more significant after Trump implemented a suspension of U.S. military support to Ukraine, following a reported disagreement with Ukrainian President Volodymyr Zelenskyy.
The action created international worries regarding political stability in Eastern Europe while affecting worldwide energy supply systems.
Additionally, there are signs that Russia could bring more oil to market if the U.S. lifts certain sanctions.
Reports suggest the White House has asked the State and Treasury Departments to prepare a list of sanctions that could be eased for negotiations with Moscow.
While some analysts argue that Russia’s OPEC+ production limits are a more significant factor than sanctions, any changes in restrictions could further disrupt the market.
The U.S. government terminated licenses allowing Chevron to operate in Venezuela which severed a significant source for crude exports.
This action will likely alter market supply relationships in the coming months.
The oil markets face numerous pressing factors including OPEC+ policy adjustments, trade conflicts and geopolitical dangers that cause market volatility, in which investors stay prepared.
