Brent crude oil futures tumbled 6% to trade near $59 per barrel on Wednesday, marking their lowest level since February 2021, as fears of a global economic slowdown rattled energy markets.
Oil slumps to four-year low
The sharp decline followed a dramatic escalation in the U.S.-China trade war, with President Trump implementing sweeping new tariffs on dozens of countries, including a punishing 104% duty on a wide range of Chinese imports. In swift retaliation, China announced it would hike tariffs on U.S. goods to 84%, effective April 10. The escalating tit-for-tat measures have deepened investor concerns that prolonged trade tensions could significantly erode global demand for energy, particularly in manufacturing-heavy economies like China, which is the world’s second-largest oil consumer.
At the same time, supply-side pressures added to the bearish sentiment. OPEC+ surprised markets by signaling a faster-than-expected ramp-up in oil production, citing a need to stabilize prices and maintain market share amid shifting geopolitical dynamics. The decision raised alarms about a potential supply glut, especially in an environment where demand growth is now being called into question due to weakening economic indicators across key regions.
API data add pressure
Adding to the mixed signals, the latest data from the American Petroleum Institute showed U.S. crude inventories unexpectedly declined by 1.1 million barrels in the week ending April 4, defying analyst expectations for a 1.4 million barrel build. While the drawdown typically would be considered supportive for prices, it was largely overshadowed by the broader macroeconomic and geopolitical risks dominating the market narrative.
Analysts warn that if trade tensions remain elevated and OPEC+ continues to increase output into a slowing market, Brent prices could remain under pressure for the foreseeable future, potentially breaching key technical support levels. Some traders are now eyeing the $55 per barrel mark as a possible near-term target, particularly if upcoming economic data from China, the Eurozone, or the U.S. confirm a deeper-than-expected slowdown.
