NEW YORK: Oil prices fell to multi-month lows on Tuesday after reports of OPEC+ plans to proceed with output increase in April while further price pressure was applied by US tariffs on Canada, Mexico and China as well as Beijing’s retaliatory tariffs.
Brent futures were down $1.50, or 2.1%, at $70.12 a barrel by 11:10 a.m. EST (1610 GMT). The session low was $69.75 a barrel, its lowest since September. US West Texas Intermediate (WTI) crude was off $1.19 a barrel, or 1.7%, at $67.18. The benchmark previously dropped to $66.77 a barrel, the lowest since November.
“The current downward trend in oil prices is primarily driven by OPEC+’s decision to increase output and the introduction of US tariffs,” said Darren Lim, commodities strategist at Phillip Nova. He said another factor was President Donald Trump’s decision to pause all US military aid to Ukraine after his Oval Office clash with President Volodymyr Zelenskiy last week.
OPEC+, the Organization of the Petroleum Exporting Countries and allies including Russia, decided on Monday to proceed with a planned April oil output increase of 138,000 barrels per day, its first since 2022. The move took the market by surprise, said Bjarne Schieldrop, chief commodities analyst at SEB. “The change in OPEC strategy looks like they are prioritising politics over price.
Those politics are likely connected with the wheeling and dealing of Donald Trump,“ Schieldrop said, referring to the US president’s calls for lower oil prices. US tariffs of 25% on imports from Canada and Mexico took effect at 12:01 a.m. EST (0501 GMT) on Tuesday, with 10% tariffs on Canadian energy, while tariffs on imports of Chinese goods were increased to 20% from 10%.
Analysts expect the tariffs to curb economic activity and demand for energy, weighing on oil prices. As the US tariffs kicked in on Tuesday, China swiftly retaliated, announcing 10-15% increases on import levies covering a range of American agricultural and food products while also placing 25 US companies under export and investment restrictions.
“While the Trump tariffs on Canada and Mexico, particularly the 10% levies on Canadian oil arrivals, have reached the realization phase, impact on oil balances is still unclear,” analysts at energy advisory firm Ritterbusch and Associates said. Further pressure on oil prices came from Trump halting military aid to Ukraine.
The move followed a Reuters report that the White House has asked the State and Treasury departments to draft a list of sanctions that could be eased for US officials to discuss during talks with Moscow.
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