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Crude oil falls to 3 year low due to tariffs and OPEC output increase
BY TIO Staff
|April 7, 2025As global trade tensions escalate and OPEC boosts production, oil prices have fallen to a three year low, fuelling fears of a global recession.
Brent (UKOIL) and WTI crude (USOIL) both fell to a low of $64.39 and $60.56 per barrel respectively on Friday, due to China introducing 34% tariffs on U.S. imports.
Further to intensifying trade tensions, OPEC's decision to increase crude oil production by 411,000 barrels daily in May is also adding pressure to lower oil demand.
Oil prices fall to multi-year lows
Last week, both Brent and WTI crude oil prices fell by more than 13% from the market open. On Friday the 4th of April, WTI fell by more than 9%, which was the most significant price drop in a single day since 2023.
The energy sectors downturn has prompted revisions in crude oil price projections and global oil demand forecasts by major investment banks. Goldman Sachs and HSBC have adjusted their expectations downward, while JP Morgan has also increased its global recession probability forecast.
Economic implications
Federal Reserve Chairman, Jerome Powell, has warned that the new tariffs could lead to increased inflation and hindered economic growth, which is adding to concerns.
Despite the negative outlook, lower oil prices may help mitigate the inflationary effects on various goods, offering some relief to consumers and businesses. However, the situation presents an uncertain future, with only a slight hope that lower prices could ease increases in trade related costs.
Will the bearish momentum continue?
The fundamental indictors suggest a negative outlook for the commodity. From a technical perspective, crude oil prices registered new multi-year lows last week and the price is also below the 100-day moving average on the medium to higher time frame charts. While the longer term downtrend remains intact, the Relative Strength Index (RSI) may be indicating that the commodity is oversold.
Short to medium term price corrections are possible. The potential support levels in sight for WTI are around the $61.50 and $57 per barrel mark, but it remains to be seen whether price will find support there.
Traders should remain vigilant to shifts in oil production, trade tariffs and global economic growth.
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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