Crude oil prices hit four-year low on recession fear, Trump’s tariffs, Saudi Arabia’s rate cut

Crude oil prices: Following Donald Trump's tariffs uncertainty and Saudi Arabia's rate cuts, crude oil prices dropped to more than four years low on Wednesday. WTI crude oil price oscillates around the $57.70 mark, logging an intraday loss of nearly 3.20% during early morning deals in the Asian stock market. Brent futures lost $2.13, or 3.39%, to $60.69 a barrel as of 0108 GMT. US West Texas Intermediate crude futures fell $2.36, or 3.96%, to $57.22. Brent reached its lowest point in March 2021, and WTI reached its lowest in February 2021. Crude oil futures contract for April expiry on the Multi Commodity Exchange (MCX) crashed 1.78% or ₹94 per barrel on Tuesday and closed at ₹5,199 per barrel.

Both benchmarks have tumbled over the five consecutive sessions since US President Donald Trump announced sweeping tariffs on most imports, sparking concerns that a global trade war would dent economic growth and hit fuel demand. The US will impose a 104% tariff on China from 12:01 a.m. EDT (0401 GMT) on Wednesday, a White House official said in a Tuesday briefing. The tariffs will increase by 50% after Beijing failed to lift its retaliatory tariffs on US goods by a noon deadline on Tuesday set by Trump.

According to commodity market experts, crude oil prices have crashed due to demand concerns fuelled by an escalating tariff war between the US and China and rate cuts announced by Saudi Arabia. They said that crude oil prices might continue to trade red and touch the $52 per barrel mark, whereas, in the domestic market, crude oil prices may test the ₹5,025 per barrel mark on MCX.

Crude oil prices drop on recession fear

Speaking on the reasons that are dragging crude oil prices across bourses, Anuj Gupta, Head — Commodity & Currency at HDFC Securities, said, "Oil prices fell sharply to an over four-year low in Asian trade on Wednesday as signs of a rapidly escalating US-China trade war sparked heightened concerns over a recession and weaker demand." He said Saudi Arabia's announcement to increase output and decrease oil prices is also a significant reason for nosediving crude oil prices.

"China's aggressive retaliation diminishes the chances of a quick deal between the world's two biggest economies, triggering mounting fears of global economic recession," said Ye Lin, vice president of oil commodity markets at Rystad Energy.

"China's 50,000 bpd to 100,000 bpd of oil demand growth is at risk if the trade war continues for longer. However, a stronger stimulus to boost domestic consumption could mitigate the losses," she said.

Exacerbating oil's decline was OPEC's decision last week, which groups together the Organization of the Petroleum Exporting Countries and allies, including Russia, to hike output in May by 411,000 barrels per day. Analysts say this move is likely to push the market into surplus.

Goldman Sachs now forecasts that Brent and WTI could edge down to $62 and $58 per barrel by December 2025 and to $55 and $51 per barrel by December 2026.

Crude oil price forecast

Anuj Gupta of HDFC Securities said, "Crude oil prices are expected to remain under pressure. They may touch $52 per barrel in the international market, whereas they may test the ₹5,025 per barrel mark on the MCX. One should look at short positions on every rise as oil prices face hurdles at $62 per barrel in the international market and ₹5,380 per barrel on the MCX."

(With inputs from Reuters)

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.