Oil prices have fallen to their lowest levels since 2021 amid the escalating trade war between the United States and China. This escalation has raised fears of a global economic recession, significantly reducing oil demand. In this context, OPEC+ is facing intense pressure, which may force it to temporarily change its production policy.
Brent crude fell to $60.36 per barrel, while West Texas Intermediate crude fell to $57.04 per barrel. This represents a decline of about 4% compared to Tuesday’s close. Since the beginning of the year, oil prices have lost about $10 per barrel, and these losses are expected to continue in the near future. Concerns have grown that tariffs will further reduce oil demand.
Trade war increases economic anxiety
Yi Lin, vice president of oil markets at Rystad Energy, told Reuters that China’s aggressive response increases doubts about the chances of a quick trade agreement between the world’s two largest economies. Lin added that this escalation raises growing concerns about a global economic recession that could significantly impact Chinese oil demand.
Lin noted that China could see a decline in its oil demand, ranging from 50,000 to 100,000 barrels per day, if the trade dispute continues. However, he added that strengthening domestic stimulus could mitigate some of the economic damage caused by the trade war.
Increased Production Affects Outlook
ING analysts wrote in a note on Tuesday that the decline in oil prices since April 2 points to a greater likelihood of an economic recession. This outlook is worrying OPEC+, which surprised the market last week by increasing production by 411,000 barrels per day in May.
Goldman Sachs Lowers Forecasts
If the downward pressure on oil prices continues, OPEC+ may be forced to roll back or even reduce its production increase. The market could find itself in an unstable situation, contributing to increased price volatility.
In light of growing fears of a recession and increased production by OPEC+, Goldman Sachs lowered its oil price forecasts for 2026. In a new note issued on April 6, the bank lowered its forecast for Brent crude to $58 per barrel and for West Texas Intermediate to $55 per barrel. The bank had already lowered its price forecasts following the announcement of US tariffs on China.
Tariffs Hurt Oil Prices
US President Donald Trump’s tariffs on China took effect on Wednesday, escalating tensions between the world’s two largest economies. An additional 50% of the tariffs were added after Beijing failed to lift its retaliatory tariffs on US goods.
Commenting, Yi Lin of Rystad Energy said that China’s aggressive response increases uncertainty about the possibility of reaching a trade agreement soon, reinforcing fears of an economic recession. He added that the trade war could harm the growth in Chinese demand for oil, which would significantly impact global oil markets.
US Oil Inventories Decline
Amid the sharp decline in oil prices, data from the American Petroleum Institute showed that US oil inventories fell by 1.1 million barrels in the week ending April 4. Analysts expected stocks to increase by about 1.4 million barrels, signaling stronger domestic oil demand. The US Energy Information Administration plans to release official inventory data later today.
Impact of Tariffs on Global Markets
Trump’s 104% tariffs on China took effect, adding another 50% to the tariffs after Beijing failed to lift retaliatory tariffs on US goods by the deadline. China has vowed not to succumb to what it describes as US blackmail, further escalating trade tensions between the two countries.
These tariffs are having a significant impact on oil prices, with many analysts expecting the repercussions to lead to a decline in global oil demand. Increased production by OPEC+ is compounding these negative effects on the market. Goldman Sachs Oil Price Forecasts
Goldman Sachs has lowered its oil price forecasts for 2026 following recent events. The bank expects Brent crude to fall to $58 per barrel, while WTI crude is expected to reach $55 per barrel in the same year.
These forecasts reflect growing concerns that markets may face additional pressures due to volatile global economic conditions. This revision reflects the ongoing challenges facing oil markets amid rising tariffs and increased production by OPEC+.
Russian Crude Oil Blend Declines
Along with the decline in oil prices, the price of Russian ESPO crude oil fell below the $60 per barrel ceiling for the first time ever on Monday. This decline comes at a sensitive time for oil markets, as the Russian oil industry faces additional challenges from the global economic situation affected by the trade war.
Pressure on OPEC+
As oil markets experience significant declines, OPEC+ is under pressure to make new decisions, which may include cutting production or postponing the planned increase. Last May, OPEC+ decided to increase production by 411,000 barrels per day, but if downward pressure on prices continues, it may have to revise this plan.
Major Challenges Due to the Escalating US-China Trade War
If the trade war between the US and China continues, OPEC+ will face challenges in effectively managing supply and demand. This situation could lead to more price volatility in the oil market in the near term.
Oil markets face significant challenges due to the escalating trade war between the US and China, as well as increased production by OPEC+. Fears of a global economic recession are growing, further depressing oil demand. Prices are expected to continue falling, with increasing pressure on OPEC+ to make decisions that may include production cuts. At the same time, China’s domestic stimulus may reduce the economic damage caused by the trade war, which could contribute to long-term market stability.
