Oil prices are under sustained downward pressure, mirroring a broader slump across global markets, after the Trump administration announced implementation of a sweeping new tariff regime. Since the announcement last week, crude prices have tumbled, to around $60 per barrel—marking their lowest level since April 2021 and reflecting growing investor unease over the potential macroeconomic fallout.
I shared my views with CNN Business Arabic | الاقتصادية on the impact of these recent tariffs on the oil market in particular
The sharp decline in oil prices – 𝑛𝑜𝑤 𝑛𝑒𝑎𝑟𝑖𝑛𝑔 𝑎 𝑓𝑜𝑢𝑟-𝑦𝑒𝑎𝑟 𝑙𝑜𝑤, has raised concerns of an global economic slowdown triggered by tariff-induced trade disruptions that could lead to boycotts, embargoes and trade wars! The nature of the tariffs has fueled retaliatory measures and the possibility of prolonged trade conflicts, which could erode business confidence, stifle investment, and weigh heavily on global GDP growth.
Even though lower energy prices might offer some relief to consumers by cushioning the inflationary impact of tariffs on goods, they carry significant downsides—particularly for oil-exporting economies and energy producers.
Upstream oil companies are particularly being squeezed from both ends. On the one hand, import duties on critical inputs such as steel, oilfield chemicals, and drilling equipment can potentially raise the cost of exploration and production. On the other hand, crude prices are falling, with the risk of breaching the psychologically significant $60 per barrel threshold. If prices slide further, high-cost producers – especially those operating in marginal shale basins, may be forced to shut in wells or delay drilling programs. This could lead to a plateauing or even a decline in U.S. crude output, reversing several years of growth.
In a move that underscores its growing anxiety about flagging demand, 𝐎𝐏𝐄𝐂 (which accounts for roughly 40% of global oil production) announced last week that it would increase output by 411,000 barrels/ day starting in May, far exceeding market expectations of a more modest 140,000-barrel hike. While some interpret this as a counterbalance to U.S. tariffs and stabilize global supply, the decision may also reflect deeper concerns about demand softening, particularly from major Asian economies – key drivers of global oil consumption, face heightened exposure to trade volatility and currency fluctuations, which could curtail industrial activity and dampen fuel demand.
As markets digest the implications of the new tariff regime, 𝒗𝒐𝒍𝒂𝒕𝒊𝒍𝒊𝒕𝒚 𝒓𝒆𝒎𝒂𝒊𝒏𝒔 𝒕𝒉𝒆 𝒅𝒆𝒇𝒊𝒏𝒊𝒏𝒈 𝒇𝒆𝒂𝒕𝒖𝒓𝒆.
Markets are still coming to terms with the new tariff regime, but the combination of increased oil production and a weaker global economic outlook puts downward pressure on oil prices – and could lead to a more uncertain market in the coming few quarters
