Oil News: Recession Risk and Trade War Fuel Bearish Sentiment as OPEC Boosts Supply

Tariff Shock, Supply Surge, and EIA Build Slam Prices

Light crude oil futures collapsed over 10% last week, closing Friday at $61.99—the lowest since early 2021—driven by deepening trade tensions, a surprise OPEC+ supply increase, and a major U.S. crude inventory build that cemented the bearish turn. WTI lost $7.37 on the week, with intraday lows touching $60.45 as traders dumped risk ahead of a global demand downgrade.

China’s Retaliation Escalates Trade War, Triggers Demand Fears

Crude’s sharp selloff followed China’s retaliatory move to impose 34% tariffs on all U.S. goods, escalating a standoff that now threatens global economic stability. With China being the world’s top oil importer, the market rapidly priced in recession risk. JPMorgan hiked the odds of a global recession to 60%, and U.S. GDP projections were cut across the board.

The economic drag is intensifying. S&P Global now sees Q1 U.S. growth at just 0.3%, while the Atlanta Fed forecasts a contraction. Meanwhile, inflation estimates have surged, with CPI projected as high as 4%. The risk of stagflation—rising prices and slowing growth—is putting direct pressure on fuel demand expectations.

EIA Inventory Surprise Confirms Softer U.S. Demand

The bearish turn was reinforced midweek by EIA data showing a 6.2 million barrel build in U.S. crude inventories—completely reversing expectations for a drawdown of over 2 million barrels. While gasoline stocks fell 1.6 million barrels, flat distillates and surging crude supplies painted a clear picture: demand is weakening, or production is running too hot.

This inventory report significantly undermined the prior week’s bullish narrative driven by geopolitical risk and technical breakouts. With storage levels rising, the supply-demand imbalance is coming into sharper focus.

OPEC+ Ramps Up Supply Despite Demand Risks

OPEC+ intensified bearish pressure by pulling forward a planned production increase. The group will now return 411,000 bpd to the market in May—triple the previously expected 135,000 bpd. This decision landed just as recession fears escalated and inventories rose, leading traders to question whether the alliance is misjudging demand conditions.

Adding to the pressure, a Russian court decision allowed Kazakhstan’s CPC terminal to stay online, removing a potential supply risk and pushing the market further into oversupply territory.

Oil Prices Forecast: Bearish Outlook Deepens Below $62

With a growing inventory surplus, deteriorating demand signals, and fresh barrels from OPEC+, crude’s near-term outlook remains decisively bearish. Unless tariffs are rolled back or demand finds unexpected support, WTI looks vulnerable to further declines, with mid-$50s in play. Traders should watch $60 as a critical support line—failure there opens the door to deeper selling.

Technically, we’re in a momentum driven sell-off. These types of breaks usually end when the bearish momentum subsides and traders find value.
The first value zone is $61.37 to $59.31. The second is way down at $53.09, which suggests $59.31 is the trigger point for an acceleration to the downside.

More Information in our Economic Calendar.