Oil prices have experienced a significant drop this week, falling to $65 per barrel, a level not seen since 2021. The decline comes as a result of the combined impact of the US import tariffs and an unexpected increase in supply from OPEC+.
Prices had previously surged after US President Donald Trump imposed tariffs on countries purchasing crude from Venezuela. However, by Friday, oil prices had reversed course, with Brent crude dropping to $65. According to oilprice.com, the decision by OPEC+ to accelerate the unwinding of production cuts and China’s retaliatory measures against the US have contributed to a $10 per barrel decline, with ICE Brent falling below $65 for the first time since August 2021.
The US West Texas Intermediate (WTI) crude futures saw a loss of $4.96, or 7.4%, closing at $61.99. Oilprice.com notes that the market’s backwardation, which barely shifted from the start of the week, suggests that the US tariffs are the primary driver behind the price drop. It also predicts that this week will be remembered as a difficult period in the history of oil markets.
In addition to the tariffs, China, the world’s largest oil importer, has escalated tensions by imposing retaliatory tariffs on US goods, raising concerns of a potential recession. From April 10, China will implement an additional 34% tariff on all US imports. The ongoing trade war, along with OPEC+’s decision to accelerate output increases, has further pressured oil prices. OPEC+ now plans to add 411,000 barrels per day to the market in May, significantly more than the initially planned 135,000 barrels per day.
