Oil prices dropped for a fifth day on Wednesday, hitting their lowest level since February 2021, after U.S. President Donald Trump's "reciprocal" tariffs took effect, including a 104% duty on Chinese goods, intensifying a global trade war.
Brent futures dropped $2.10, or 3.34%, to $60.72 a barrel as of 9:35 a.m. GMT. U.S. West Texas Intermediate (WTI) crude futures fell $2.04, or 3.42%, to $57.54. Both contracts lost as much as 4% before paring some losses.
Brent and WTI have tumbled over the five sessions since Trump announced sweeping tariffs on most imports, prompting concerns that this will dent economic growth and hit fuel demand.
"Some U.S. analysts suggested that the White House wants to drive oil prices closer to $50 as the administration believes that the U.S. oil and gas industry can survive a period of disruption," said Ashley Kelty, analyst at Panmure Liberum
"We see this goal as somewhat delusional ... and it will merely see U.S. production shut in and open the door for OPEC to reclaim its position as the swing producer," said Kelty.
Trump's 104% tariffs on China kicked in from 12:01 a.m. EDT (4:01 a.m. GMT) on Wednesday, adding 50% to tariffs after Beijing opted not to lift its retaliatory tariffs on U.S. goods.
European Union countries are also expected to approve on Wednesday the bloc's first countermeasures against Trump's tariffs, joining China and Canada in retaliating.
Beijing vowed not to bow to U.S. blackmail after Trump threatened an additional 50% tariff on Chinese goods if the country did not lift its 34% retaliatory levy.
"China's aggressive retaliation diminishes the chances of a quick deal between the world’s two biggest economies, triggering mounting fears of economic recession across the globe," said Ye Lin, vice president of oil commodity markets at Rystad Energy.
"China's 50,000 bpd to 100,000 bpd of oil demand growth is at risk if the trade war continues for longer, however, a stronger stimulus to boost domestic consumption could mitigate the losses," she said.
China, meanwhile, announced on Wednesday it would impose an additional 50% tariff on U.S. imports, matching the extra 50% tariff Trump imposed on Beijing after the initial 34% reciprocal tariff, bringing it to 84% from Thursday.
Exacerbating oil's decline was a decision last week by OPEC+, which groups the Organization of the Petroleum Exporting Countries (OPEC) and allies, including Russia, to raise output in May by 411,000 barrels per day, a move that analysts say is likely to push the market into surplus.
Goldman Sachs now forecasts that Brent and WTI could edge down to $62 and $58 per barrel by December 2025 and to $55 and $51 per barrel by December 2026.
As oil prices sank, Russia's ESPO Blend oil price fell below the $60 per barrel Western price cap level for the first time ever on Monday.
In one positive sign for demand, data from the American Petroleum Institute industry group showed U.S. crude inventories fell by 1.1 million barrels in the week ended April 4, compared with expectations in a Reuters poll for a build of about 1.4 million barrels.
