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Oil News: Crude Sinks 8% on Tariff War Fallout and Bearish Outlook

By:
James Hyerczyk
Published: Apr 4, 2025, 12:12 GMT+00:00

Key Points:

  • Crude plunges 8%, closing below $65 as China retaliates with 34% tariffs, fueling fears of a global trade war.
  • Analysts warn of global oil demand destruction as trade tensions and economic risks erode energy consumption forecasts.
  • OPEC+ to boost output by 411,000 bpd in May, tripling its earlier plan and adding pressure to already falling oil prices.
Crude Oil News
In this article:

Crude Plunges 8% as Tariff War Escalates, Fueling Recession Fears and Bearish Oil Forecasts

Daily Light Crude Oil Futures

Crude prices nosedived Friday, with Brent falling 8% to below $65 a barrel, marking its lowest settlement since the depths of the COVID-driven collapse. The sell-off followed China’s announcement of 34% retaliatory tariffs on all U.S. goods starting April 10, in response to sweeping levies imposed by President Trump earlier in the week.

At 12:04 GMT, Light Crude Oil Futures are trading $61.52, down $5.43 or -8.11%.

Markets quickly priced in the likelihood of a global trade war, driving both Brent and WTI to their steepest weekly losses in more than two years. With world economies already slowing, traders are now bracing for a sharp decline in oil demand. Saxo Bank’s head of commodity strategy Ole Hansen warned that the escalation “will hurt economic growth and demand for key commodities such as crude oil and refined products.”

OPEC+ Output Hike Deepens Bearish Sentiment

Further pressure came from OPEC+, which announced a more aggressive timeline for increasing output. The alliance now plans to return 411,000 barrels per day (bpd) to the market in May—well above the previously scheduled 135,000 bpd. This decision, made as demand indicators falter, is intensifying fears of an oversupplied market in the second quarter.

U.S. Economic Indicators Flash Warning Signs

The timing of the tariff escalation is compounding economic fragility in the U.S., where GDP forecasts have already been revised lower. S&P Global is now projecting just 0.3% growth for Q1, while the Atlanta Fed’s GDPNow model indicates a 1.4% contraction. High Frequency Economics has gone further, anticipating a full-blown recession with back-to-back quarterly declines.

At the same time, inflation is set to accelerate, with estimates placing CPI as high as 4%, up from 2.8%, due to rising import costs. Companies are responding with hiring freezes and job cuts. Stellantis, for example, announced nearly 1,000 layoffs linked to tariff pressures. Business sentiment is also deteriorating, with the ISM services employment index falling to a one-year low.

Bearish Oil Outlook Driven by Demand Destruction

With global growth slowing, tariffs hitting trade, and OPEC+ adding supply, crude oil markets face sustained downside risk. Demand destruction, rather than geopolitical disruptions, now dominates the outlook. Barring a rapid de-escalation of trade tensions, the forecast for oil prices remains firmly bearish.

More Information in our Economic Calendar.

About the Author

James Hyerczyk is a U.S. based seasoned technical analyst and educator with over 40 years of experience in market analysis and trading, specializing in chart patterns and price movement. He is the author of two books on technical analysis and has a background in both futures and stock markets.

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