Oil prices tumbled over 2% on Monday amidst a volatile trading day on Wall Street, triggered by President Trump's threat to impose additional tariffs on China, which caused stock prices to decline.
The West Texas Intermediate (CL=F) futures briefly fell below $60 per barrel for the first time since 2021 before recovering to close at $60.70. Similarly, Brent (BZ=F), the global benchmark, also dropped to settle at $64.21 per barrel.
President Trump's announcement of potentially imposing a further 50% tariff on China if Beijing did not withdraw its previous 34% tariffs, which were in response to US levies against its trading partners, led to a fluctuation in oil prices.
There was a momentary recovery in crude prices as the S&P 500 (^GSPC), Dow Jones Industrial Average (^DJI), and Nasdaq Composite (^IXIC) oscillated between gains and losses following indications on social media that Trump might consider a 90-day halt in tariffs. However, the White House later dismissed this news as untrue.
Last week, concerns over weakening demand due to President Trump's tariff policy caused oil prices to drop by 11%. Moreover, Saudi Arabia reduced its crude export prices to Asian buyers by $2.30 per barrel for May, soon after OPEC+ announced an increase in output higher than anticipated for the following month.
Despite the recent price decline, analysts predict a price floor around $60 per barrel as it benefits OPEC+ budgets and serves the interests of the US shale industry, according to Citi analysts.
Energy stocks (XLE) have been at the forefront of the market downturn since President Trump's tariff announcement last Wednesday. The drop in oil prices escalated when China, a major crude importer, retaliated by imposing an additional 34% tariff on US products in response to the US levies.
The trade tensions caused a global stock market sell-off following President Trump's announcement. Even though energy was excluded from the broader import duties on US trading partners, oil prices fell over 6% on Thursday.
JPMorgan's Natasha Kaneva warned that the tariffs could significantly impact US and global economic growth, potentially leading to a recession this year. Crude prices plunged further after OPEC+ decided to boost oil supply by more than 400,000 barrels per day starting May, which was three times higher than initially indicated.