Oil prices collapsed to a four-year low early Wednesday as the United States fired the next salvo in an escalating trade war with China, triggering fresh demand concerns just as global crude inventories begin to swell.
Brent crude tumbled $2.38, or 3.79%, to $60.44 a barrel, while U.S. West Texas Intermediate (WTI) sank $2.46, or 4.13%, to $57.12, as of 0423 GMT. Both benchmarks are now trading at their weakest levels since February 2021, erasing nearly all their gains from post-pandemic recovery optimism.
Markets React to Renewed Trade War
The dramatic plunge comes hours after President Donald Trump implemented 104% tariffs on Chinese imports, a sharp escalation that blindsided markets already jittery about slowing demand growth. The move came after Beijing failed to remove retaliatory duties by the Tuesday noon deadline set by the White House.
The hike effectively doubles existing tariffs, adding to uncertainty for two of the world’s largest economies—and the biggest consumers of oil. With both sides showing no signs of backing down, traders are bracing for a prolonged standoff that could dent global growth and throttle fuel consumption.
“Markets are being driven more by geopolitics than fundamentals at this point,” said Noriko Tanaka, chief strategist at Mizuho Energy Markets. “A 104% tariff is not just symbolic—it sends a message that the gloves are off.”
Supply Outlook Adds to Pressure
While demand concerns took the spotlight, rising supply levels added fuel to the fire. Industry data released late Tuesday showed U.S. crude stockpiles fell last week, but analysts say the decline is seasonal and unlikely to offset the larger global trend toward oversupply.
Meanwhile, the six-month Brent spread—a key indicator of market tightness—narrowed to 79 cents, its lowest since mid-November. That’s an 86% drop from its January peak of $5.69, when traders were still pricing in a rebound in Chinese consumption and ongoing OPEC+ cuts.
“We’re staring at a potential surplus again, especially with U.S. production remaining resilient and Russian barrels finding their way to market,” said Jameel Rawat, global head of commodities at Mirae Asset Securities.
Tariffs Trump Fundamentals—for Now
The latest collapse extends a five-day losing streak for both Brent and WTI, triggered after Trump unveiled sweeping tariff hikes late last week. What started as a market correction has morphed into full-blown panic over a trade war redux.
China’s Ministry of Commerce said it would “respond proportionately” but gave no further details. The ambiguity has only heightened concerns among energy traders who had hoped for at least a fragile truce between Washington and Beijing.
“This trade shock is landing right as global demand growth is already on shaky ground,” said Rawat. “For oil, it’s a double whammy.”
What’s Next?
While some analysts believe the selloff could be overdone, others argue prices may not stabilize until clarity emerges on trade negotiations—or unless OPEC+ intervenes with deeper cuts.
For now, the path of least resistance appears downward.
