BEIJING/SINGAPORE: Oil prices extended losses on Tuesday following reports that OPEC+ will proceed with a planned output increase in April, while markets braced for the impact of US tariffs on Canada, Mexico and China, as well as Beijing’s retaliatory tariffs on the US.
Brent futures fell 57 cents, or 0.8 percent, to $71.05 a barrel at 9:50 a.m. Saudi time, as US West Texas Intermediate crude eased 39 cents, or 0.6 percent, to $67.98.
“The current downward trend in oil prices is primarily driven by OPEC+’s decision to increase output and the introduction of US tariffs,” said Darren Lim, commodities strategist at Phillip Nova.
A further complicating factor was geopolitical developments related to the Russia-Ukraine conflict, he added.
President Donald Trump paused all US military aid to Ukraine following his Oval Office clash with President Volodymyr Zelensky last week.
The Organization of the Petroleum Exporting Countries and allies like Russia, known as OPEC+, decided to proceed with a planned April oil output increase of 138,000 barrels per day, the group’s first since 2022.
“While this decision aims to gradually unwind previous output cuts, it has raised concerns about a potential oversupply in the market,” Lim said.
Trump’s 25 percent tariffs on imports from Canada and Mexico took effect at 8:01 a.m. Saudi time on Tuesday, with 10 percent tariffs for Canadian energy, while imports on Chinese goods will increase to 20 percent from 10 percent.
Analysts expect the tariffs to weigh on economic activity and fuel demand, putting downward pressure on oil prices.
“Market participants are struggling to gauge the impact of the flood of energy-related policy announcements made by the Trump administration this month,” BMI analysts wrote in a note.
“However, those weighing to the downside, notably US tariff measures, are currently winning out.”
As the US tariffs kicked in on Tuesday, China swiftly retaliated, announcing 10 percent to 15 percent hikes to import levies covering a range of American agricultural and food products, and placing 25 US firms under export and investment restrictions.
Further weighing on oil was Trump’s halt of military aid to Ukraine, as the market has viewed the growing distance between the White House and Ukraine as a sign of a potential easing of the conflict.
That in turn could lead to sanctions relief for Russia, with more oil supply returning to the market.
The pause followed a Reuters report that the White House has asked the State and Treasury departments to draft a list of sanctions that could be eased for US officials to discuss during talks with Moscow, sources have said.
“The perfect storm for crude oil has intensified. Reports that the US has paused military aid to Ukraine is viewed as a precursor to lifting sanctions on Russian oil,” said IG market analyst Tony Sycamore.
“It also comes at the same time as US tariffs on Canada, Mexico and China come into effect, sparking fears of a trade war. Crude oil just cannot take a break at the moment.”
However, Goldman Sachs analysts said in a note on Monday that Russia’s oil flows are constrained more by its OPEC+ production target than sanctions, warning that an easing might not boost them significantly.
The bank also said higher-than-expected crude supply and a demand hit due to softer US activity and tariff escalation posed downside risks to oil price forecasts.
