Tariffs Shake Oil Prices

Oil prices saw a modest recovery on Tuesday, climbing over 1% after sharp declines in previous sessions. The rebound follows a steep selloff triggered by concerns that sweeping U.S. tariffs may weaken global demand and tip economies into recession. Brent crude rose by 81 cents to $65.02 per barrel, while West Texas Intermediate (WTI) gained 92 cents, reaching $61.61.

On Monday, crude prices dropped around 2%, approaching four-year lows, as investors grew increasingly worried about President Trump’s aggressive tariff strategy. The broad new tariffs include a universal 10% levy on imports, with some categories facing duties as high as 50%. Trump argues the measures are necessary to rejuvenate U.S. industry, but critics warn of escalating trade conflicts and weakening global growth.

Several countries, including China and EU members, have retaliated or proposed countermeasures. China announced reciprocal tariffs, with rates as high as 34%, while the European Commission is planning 25% duties on various U.S. goods. Trump has threatened even harsher actions if countries don’t back down. These developments have created significant market volatility, with oil prices fluctuating sharply within hours.

A Reuters poll suggested U.S. oil inventories likely rose by 1.6 million barrels last week, indicating softening demand. Despite the drop in prices, analysts believe oil may find support near $60 per barrel — the estimated break-even point for U.S. producers. If prices remain low, production could slow, which may help stabilize the market. Eurasia Group anticipates reduced drilling will set a floor for WTI in the $50s.

Adding to the pressure, OPEC+ producers agreed to increase oil output by 411,000 barrels per day, far exceeding expectations. Saudi Arabia also slashed crude prices for Asian buyers to the lowest in four months. These supply-side moves, combined with trade tensions, have further shaken investor sentiment. Goldman Sachs and JPMorgan now estimate up to a 60% chance of a global recession within the year.

As global economies brace for a potential slowdown, the energy sector faces increased uncertainty. While lower oil prices could ease inflation and benefit consumers, prolonged weakness threatens investment, jobs, and production in major oil-producing regions. With no resolution to trade disputes in sight, oil markets are likely to remain volatile in the near term.