Unlock the White House Watch newsletter for free
Your guide to what the 2024 US election means for Washington and the world
Brent crude dipped below $60 per barrel for the first time in four years as Donald Trump’s sweeping global import tariffs went into effect and his trade war with China escalated.
The price fell to $58.60 in morning trading in London and hovered close to $60 throughout the day, marking a roughly 18 per cent drop over the past five days as Trump has pushed ahead with tariff plans.
The last time Brent crude has fallen below $60 was in February 2021.
“This is escalating, not de-escalating,” said Amrita Sen, at research group Energy Aspects.
“Some of it will get negotiated away but a lot of it will not. I think we are looking at a much weaker global growth and global oil demand scenario, and that’s what’s getting priced in.”
US tariffs on Chinese goods have now reached 104 per cent, prompting the world’s second-largest oil consumer to respond with an additional 50 per cent tariffs on US goods on top of the 35 per cent already announced.
The prospect of prolonged trade wars between the world’s two largest economies has triggered growing fears of recessions.
It follows a decision by the Opec+ coalition of oil-producing nations led by Saudi Arabia to increase output by about 411,000 barrels of oil per day from May, adding to downward pressure on crude prices.
The move followed disagreements over whether coalition countries were sticking to previously agreed production cuts, with Kazakhstan consistently pumping above its quota.
“Oil has been hit with the poisoned cocktail of trade war demand concerns at the same time as Opec [plans to increase production],” said Helima Croft, global head of commodity strategy at RBC Capital Markets.
The market was still contending with the “trauma of previous oil price wars”, she noted, notably in 2020 when Saudi Arabia briefly maximised production during the pandemic-era lockdowns despite demand plummeting, causing prices to collapse.
“This is not a virus — this is a policy choice made by a head of state,” added Croft. “With Covid, we didn’t know if it was the end of the world as we know it.
“This is a policy choice. How low can oil go? How intent is President Trump to see this through?”
Despite the recession fears, the US president has welcomed lower oil prices, given his promises to cut costs for US consumers. But they also pose a threat to US oil producers, many of whom will find it uneconomic to produce at today’s prices.
“At $60 per barrel, it’s going to be difficult for a lot of the US producers,” said Callum McPherson, head of commodities at Investec.
Trump’s administration has indicated it wants to see crude fall to $50 per barrel or lower, with his trade adviser Peter Navarro, suggesting it would help curb inflation.
“I don’t know though that the heads of the oil companies are aligned with that message,” added Susan Bell, senior vice-president, commodity markets, at Rystad Energy. “At $50, it’s not economic to develop oil. So it’s deflationary but it’s also an overall retraction of the economy.”
BP’s shares closed down 6 per cent in London, while Shell’s lost 4 per cent as they underperformed the FTSE 100 index, which ended 3 per cent lower.
