Oil prices experienced a significant downturn on Wednesday, dropping by nearly 7% and reaching their lowest levels in four years. The decline came in response to China’s announcement of new tariffs on U.S. goods, a direct reaction to President Donald Trump’s own tariff measures. Although prices began to recover slightly, the market remains jittery amid escalating trade tensions.
China’s Tariff Response
In a striking move, China revealed plans to impose 84% tariffs on select U.S. imports, a sharp increase from the previously set 34%. The Chinese finance ministry confirmed that these tariffs would take effect starting Thursday. As a result, Brent crude futures fell by $2.47, or 3.9%, settling at $60.35 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped by $2.35, also down 3.9%, reaching $57.23.
- Both oil contracts initially plunged around 7% before slightly recovering.
- Trump’s tariffs of 104% on Chinese goods went into effect at 12:01 a.m. EDT on Wednesday, which further heightened concerns over global economic growth and demand for oil.
Global Reactions and Market Trends
European Union nations are also poised to enact their first countermeasures against Trump’s tariffs, joining China and Canada in retaliatory actions. The decline in oil prices has continued for five consecutive sessions following the announcement of sweeping tariffs by the U.S., raising alarm bells about potential repercussions on the global economy.
According to recent forecasts from Goldman Sachs, Brent and WTI prices might stabilize at $62 and $58 a barrel, respectively, by December 2025, and drop further to $55 and $51 by December 2026. Since Trump’s announcement on April 2, oil prices have plummeted nearly 20%, marking the most significant five-day decline since March 2022.
Expert Insights on Market Conditions
Morgan Stanley has revised its projections for Brent crude, now estimating prices at $65 for Q2, $62.50 for Q3, and $62.50 for Q4. Commentary from Gyan Ranjan Singh, a Commodity Analyst at Choice Broking, indicates that crude oil recently hit a four-year low on the MCX at approximately 4,975, breaching a vital long-term support level.
He notes that the current technical indicators paint a bearish picture, with a breakdown of the descending triangle formation and prices trading below key weekly moving averages. Although the market is oversold, signaling a potential short-term recovery, the strong bearish sentiment, indicated by an RSI reading of around 21, suggests that traders should remain cautious.
Trading Strategies and Recommendations
For those considering a bullish approach, this oversold condition could present a tactical opportunity. Here are some key levels to watch:
- Immediate Support: 4,870–4,800
- Next Critical Level: 4,666
Traders might find a low-risk entry point within the 4,870-4,800 range, with a suggested stop loss set below 4,600 and upside targets of 5,380 and 5,535. Swing traders are encouraged to look for bullish reversal patterns and RSI divergence on the daily chart as confirmation before committing to trades.
Investors should maintain a cautious approach, paying close attention to critical support levels while trailing profits as crude oil attempts to break through resistance on the upward climb.
Stay tuned for further developments on this evolving market situation.
