LONDON: Oil prices plunged as much as 7 percent on Wednesday, hitting fresh four-year lows before recovering some ground, after China announced additional tariffs on US goods in retaliation against President Donald Trump’s tariff policy.
China will impose 84 percent tariffs on US goods from Thursday, up from the previously announced 34 percent, the finance ministry said.
Brent futures were down $2.47, or 3.9 percent, to $60.35 a barrel at 5:23 p.m. Saudi time. US West Texas Intermediate crude futures were down $2.35, or 3.9 percent, at $57.23.
Both contracts lost about 7 percent before paring losses.
Trump’s 104 percent tariffs on China kicked in from 7:01 a.m. Saudi time on Wednesday, ratcheting up duties after Beijing failed to lift its initial retaliatory tariffs on US goods.
The escalating trade war between China and the US is stoking fears of a global recession, said UBS analyst Giovanni Staunovo.
“While oil demand has likely not suffered yet, rising concerns of weaker oil demand over the coming months require lower prices to trigger supply adjustments to prevent an oversupplied market,” Staunovo added.
EU countries, meanwhile, are expected to approve the bloc’s first countermeasures against Trump’s tariffs on Wednesday, adding to China’s and Canada’s retaliatory measures.
“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 (barrels per day) to 100,000 bpd of oil demand growth is at risk if the trade war continues for longer. However, stronger stimulus to boost domestic consumption could mitigate the losses.”
Brent and WTI have fallen for five sessions since Trump announced sweeping tariffs on most imports, prompting concerns over economic growth and demand for fuel.
“Some US analysts suggested that the White House wants to drive oil prices closer to $50 as the administration believes that the US oil and gas industry can survive a period of disruption,” said Panmure Liberum analyst Ashley Kelty.
“We see this goal as somewhat delusional ... and (it) will merely see US production shut in and open the door for OPEC to reclaim its position as the swing producer.”
Exacerbating oil’s decline was a decision last week by the OPEC+ group of producers to raise output in May by 411,000 bpd, which analysts say is likely to push the market into surplus.
Goldman Sachs now forecasts that Brent and WTI could be at $62 and $58 a barrel respectively by December 2025 and $55 and $51 by December 2026.
In one positive sign for demand, data from the American Petroleum Institute industry group showed that US crude inventories fell by 1.1 million barrels in the week ending April 4, compared with expectations in a Reuters poll for a build of about 1.4 million barrels.
Official inventory data from the Energy Information Administration is due on Wednesday 7:30 p.m. Saudi time.
