Oil prices plummet as trade wars escalate

Oil prices plummeted on Monday’s opening and WTI price sank below $60.0 per barrel, its lowest value in four years. WTI price steadied later on Monday, however, trading above $61.0 per barrel. If oil prices retreat, they may encounter support near $56.7 per barrel, while resistance may be found near $73.1 per barrel.

Oil prices dipped last week after OPEC+ decided to raise its oil production. The organization decided to raise oil output by 411K barrels per day in May, putting pressure on oil prices.

US President Donald Trump has been using threats of imposing trade tariffs as a negotiation tool to further his agenda with other countries. Trump’s tariffs may spark global trade wars and are causing turmoil in markets. 

Last week, Trump announced a 10% tariff on all imports into the US, as well as an additional 25% tariff on all imported automobiles and high reciprocal taxes against many countries. Oil prices plummeted after Trump’s tariff announcement. China has threatened to impose tariffs of 34% on all US imports from April 10 in retaliation for Trump’s tariffs. China retaliated with 34% tariffs on US imports, causing the crisis to escalate. Trump further exacerbated matters on Monday by threatening China with additional 50% tariffs, starting April 9. The potential of a trade war between China and the US is lowering the oil demand outlook, causing oil prices to plummet.  

Oil prices are kept in check by high central banks’ interest rates. The US Federal Reserve kept interest rates unchanged at its policy meeting in March. FOMC policymakers voted unanimously to maintain the federal funds rate to a target range of 4.25% to 4.50%. Markets are pricing in two more rate cuts this year, with the first rate cut in June, while a third rate cut is also considered possible.

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Written by:
Myrsini Giannouli

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