Oil prices fell to their lowest levels in over four years on Wednesday, driven by growing concerns over demand amidst the ongoing trade war between the U.S. and China, the world’s two largest economies, as well as an increasing outlook for supply.
As of 0423 GMT, Brent crude futures dropped $2.38, or 3.79%, to $60.44 a barrel, while U.S. West Texas Intermediate (WTI) crude futures declined $2.46, or 4.13%, to $57.12. Both benchmarks hit their lowest points since February 2021.
The six-month price spread for Brent collapsed to 79 cents, its lowest level since mid-November, signaling a potential surplus in the market. This drop represents an 86% decline from the high of $5.69 seen on January 15, which reflected expectations of tighter supply and a recovery in Chinese demand.
The steep drop in oil prices has come after five consecutive sessions of losses, triggered by U.S. President Donald Trump’s announcement of additional tariffs on Chinese imports, escalating fears that a global trade war could harm economic growth and reduce fuel demand.
On Wednesday, Trump’s tariffs of up to 104% on Chinese goods went into effect, increasing tariffs by 50% after China failed to lift retaliatory tariffs by a deadline Trump set. In response, Beijing vowed not to submit to U.S. pressure, signaling that the trade conflict may persist and potentially worsen.
Ye Lin, vice president of oil commodity markets at Rystad Energy, noted that China’s aggressive response to the U.S. tariffs has reduced the likelihood of a quick trade resolution, deepening global recession fears. She also pointed out that China’s oil demand growth, expected to rise by 50,000 to 100,000 barrels per day, could be at risk if the trade dispute continues, though stronger domestic stimulus in China might alleviate some of those losses.
Further weighing on oil prices is the decision by OPEC+ to increase output by 411,000 barrels per day in May, a move that analysts warn could push the market into surplus.
Goldman Sachs has now revised its forecast for oil prices, predicting Brent and WTI could fall to $62 and $58 per barrel by December 2025, and further drop to $55 and $51 per barrel by December 2026.
However, there was a slight positive sign for oil demand as the American Petroleum Institute (API) reported that U.S. crude inventories fell by 1.1 million barrels for the week ending April 4, contrary to expectations for an inventory increase. Official data from the U.S. Energy Information Administration (EIA) is expected to be released later on Wednesday.
