Oil prices dropped by as much as 3% on April 3 following the announcement of new tariffs by U.S. President Donald Trump, sparking fears of a global trade war. Investors are concerned that escalating tariffs will slow down economic growth and reduce fuel demand.
Brent crude futures were down $1.60, or 2.13%, at $73.35 per barrel by 03:31 GMT, after falling as much as 3.2% earlier, marking the biggest daily decline since March 5. U.S. West Texas Intermediate (WTI) crude futures were down $1.62, or 2.26%, at $70.09, after slipping by 3.4%.
On April 2, President Trump announced a 10% minimum tariff on most goods imported to the U.S., the world’s largest oil consumer, with much higher tariffs on products from several countries. This move has intensified concerns of a global trade war that could increase inflation and dampen economic growth.
“The U.S. tariff announcement clearly caught markets off guard. Pre-announcement speculation suggested a flat 15-20% tariff, but the final decision was more hawkish,” said IG Market Strategist Yeap Jun Rong. “For oil prices, the focus now shifts to the global growth outlook, which is likely to be revised downward due to these higher-than-expected tariffs.”
Oil, gas, and refined products were exempt from the new tariffs, according to the White House. However, the global market was rattled by the tariffs, with Japan’s Nikkei dropping to an eight-month low, China’s yuan reaching its lowest levels in seven weeks, and global stock markets plummeting.
Bjarne Schieldrop, SEB Chief Commodities Analyst, remarked, “We know it will be negative for trade, economic growth, and oil demand growth. But we don’t know how bad it will be as the effects come a little bit down the road.”
UBS analysts have also lowered their oil price forecasts by $3 per barrel for 2025-26 to $72 per barrel, citing weaker fundamentals.
Further reinforcing the bearish sentiment, the U.S. Energy Information Administration (EIA) reported a surprise increase in crude inventories, rising by 6.2 million barrels last week, far surpassing the expected decline of 2.1 million barrels. Gasoline demand was lower, and refinery runs were down, even as plants should be increasing production ahead of the summer driving season.