Oil prices are nearing their lowest closing figures since the height of the COVID-19 pandemic in 2021, largely due to a wave of tariffs introduced by U.S. President Donald Trump and an increase in production announced by the OPEC group. As of Friday morning, Brent crude futures saw a significant drop of $2.29, or 3.3%, settling at $67.85 a barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude futures fell by $2.32, or 3.5%, reaching $64.63. Both benchmarks are positioned for their largest weekly percentage declines in six months.
Tariffs Impacting Crude Prices
The announcement of new tariffs by Trump earlier in the week significantly affected crude oil prices. Investors rapidly sought refuge in safer assets such as bonds, the Japanese yen, and gold, triggering a wave of selling across global markets. The U.S. dollar index, which gauges the strength of the dollar against six major currencies, tumbled to 102.98, marking its lowest point since mid-October.
John Evans, an oil broker at PVM, remarked, "Given the combination of tariffs and OPEC’s output increase, the oil market is experiencing a level of selling not seen since the pandemic collapse." This downward trend continued into the Asian trading session.
OPEC’s Production Plans Fuel Market Anxiety
Compounding the oil market’s woes, the Organization of the Petroleum Exporting Countries (OPEC) and its allies have accelerated their plans to boost output. They now aim to increase production by 411,000 barrels per day (bpd) in May, a significant rise from the earlier target of 135,000 bpd. Evans noted, "The timing of this decision is quite remarkable."
Although imports of oil, gas, and refined products are exempt from the new tariffs, these policies could potentially trigger inflation, stifle economic growth, and escalate trade tensions, all of which can negatively affect oil prices.
Goldman Sachs Lowers Oil Price Forecast
In response to the shifting market conditions, analysts at Goldman Sachs have revised their price targets for Brent and WTI crude for December 2025, lowering them by $5 each to $66 and $62, respectively. Daan Struyven, head of oil research at Goldman, cautioned that "the risks to our revised oil price forecast lean towards the downside, particularly for 2026, due to increasing recession concerns and, to a lesser degree, higher OPEC supply."
Potential for Market Recovery
Conversely, analysts at Rystad Energy are optimistic about a potential rebound in oil prices in the upcoming months. Mukesh Sahdev, the firm’s global head of commodity markets, stated, "Given the likelihood of supply disruptions from sanctions and tariffs affecting both sellers and buyers, it’s improbable that oil prices will remain below $70 for an extended period."
In summary, the oil market is currently facing significant challenges, but external factors may influence a recovery sooner than expected. Investors and stakeholders will be watching closely as these dynamics unfold.
