Oil Prices Plummet to Three-Year Low Amid Trade War Concerns
Oil prices continued their downward spiral for the third consecutive day, dropping nearly 3% to their lowest levels in three years. The decline was fueled by mounting worries that U.S. President Donald Trump’s trade war could hinder economic growth and weaken demand for crude oil.
Brent crude, the global benchmark, fell to $68.33 per barrel on Wednesday, its lowest price since December 2021. Similarly, West Texas Intermediate (WTI), the U.S. benchmark, plunged over 4% to $65.22 per barrel.
The sharp decline was exacerbated by a report from the U.S. Energy Information Administration (EIA), which revealed a larger-than-expected increase in American crude inventories. Stockpiles rose by 3.6 million barrels in the previous week, surpassing analyst predictions and heightening concerns about an economic slowdown. Market jitters intensified after Trump announced new trade tariffs on Canada, Mexico, and China earlier in the week.
Callum Macpherson, head of commodities at Investec, expressed concerns about the impact of Trump’s tariffs on the markets. He cautioned that crude prices were vulnerable to a more significant correction.
Further adding to the downward pressure, OPEC+ announced its decision to proceed with a plan to increase oil production beginning in April. This move marks the end of years of supply cuts and will see eight member countries, including Saudi Arabia and Russia, collectively raise output by 120,000 barrels per day in April and by a total of 2.2 million barrels per day over the next 18 months.
In recent years, OPEC+ has implemented production cuts to support crude prices, often disregarding U.S. requests to boost supply and reduce fuel costs. With three rounds of production cuts in place, the group currently produces nearly 6 million barrels per day below its total capacity, equivalent to about 6% of global supply.
Saudi Arabia has shouldered the majority of these reductions, slashing its production by 2 million barrels per day over the past two years. Reports from the Financial Times in September suggested that Saudi officials were considering restoring output for the first time in years, even if it resulted in prolonged price weakness.
Amrita Sen of Energy Aspects highlighted that the drop in WTI prices triggered additional selling pressure, particularly for U.S. producers who had hedged their price exposure with put options. She noted that liquidity and growth concerns had weighed on broader sentiment, pushing crude prices below critical levels and prompting further declines.
