Oil Sinks 8% on China Tariffs, Recession Fears Mount
(Reuters) — Oil prices plunged nearly 8% on Friday, heading for their lowest close since the middle of the pandemic in 2021, as China ramped up tariffs on U.S. goods in the most serious escalation in a global trade war that has investors worried about a recession.
China announced it will impose additional tariffs of 34% on all U.S. goods from April 10. Nations around the world have readied retaliation after Trump raised tariff barriers to their highest in more than a century, leading to a plunge in world financial markets.
Brent futures LCOc1 dived $5.55, or 7.9%, to $64.59 a barrel by 10:39 a.m. ET (14:39 GMT). U.S. West Texas Intermediate crude futures lost $5.87, or 8.8%, to $61.04. Brent and WTI fell to $64.15 and $60.81 a barrel, respectively, earlier in the session, a four-year low.
Both benchmarks were on course for their biggest weekly losses in percentage terms in more than two years.
"The real test, of course, will be if reciprocal tariffs emerge and deal a blow to global oil demand (which is what the market is now pricing in) or is this another smoke-and-mirror negotiating tactic from the Trump team," said Dennis Kissler, senior vice president of trading at BOK Financial.
"One thing is for sure, the uncertainty is likely going to remain a price headwind for crude for the next few trading days," Kissler added.
Investment bank JP Morgan said it now sees a 60% chance of the global economy entering recession by year end, up from 40% previously.
Fuelling the oil sell-off was a decision by the Organization of the Petroleum Exporting Countries and its allies, known collectively as OPEC+, to advance plans for output increases, with the group now aiming to return 411,000 barrels per day (bpd) to the market in May, up from the previously planned 135,000 bpd.
In another dampener on prices, the Caspian Pipeline Consortium (CPC) said on Friday that a Russian court ruled that its Black Sea export terminal facilities should not be suspended, a decision that could avert a potential fall in Kazakhstan's oil production and supplies via the CPC.
Imports of oil, gas and refined products were given exemptions from Trump's sweeping new tariffs, but the policies could stoke inflation, slow economic growth and intensify trade disputes, weighing on oil prices.
Goldman Sachs analysts responded with sharp cuts to their December 2025 targets for Brent and WTI by $5 each to $66 and $62 respectively.
"The risks to our reduced oil price forecast are to the downside, especially for 2026, given growing risks of recession and to a lesser extent of higher OPEC+ supply," the bank's head of oil research, Daan Struyven, said in a note.
HSBC trimmed its 2025 global oil demand growth forecast from 1 million bpd to 0.9 million bpd, citing tariffs and the OPEC+ decision.
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