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Oil prices plunged by 8% on Friday, heading for their lowest close since the height of the coronavirus pandemic in 2021.
This dramatic drop was triggered by escalating tensions in the global trade war between the US and China. In retaliation for President Trump’s recent tariff hikes, China announced plans to impose an additional 34% tariff on all US goods starting April 10.
Global markets reacted sharply, with Brent futures falling by $5.30, or 7.6%, to $64.84 a barrel by 1254 GMT, while US West Texas Intermediate (WTI) crude dropped $5.47, or 8.2%, to $61.48. Both benchmarks were on track for their largest weekly losses in over two years.
Ole Hansen, head of commodity strategy at Saxo Bank, stated, “China’s aggressive response to US tariffs all but confirms we are heading towards a global trade war, a war that has no winners and will hurt economic growth and demand for key commodities such as crude oil and refined products.”
Compounding the sell-off was a decision by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, to accelerate plans for output increases.
The group now aims to return 411,000 barrels per day to the market in May, up from the previously planned 135,000 barrels per day.
The move by OPEC+ further added to concerns that the global oil market would face oversupply. Meanwhile, the U.S. tariffs, which exempted imports of oil, gas, and refined products, are expected to spur inflation, slow economic growth, and intensify trade disputes, all of which weigh heavily on oil prices.
