[HOUSTON] Oil prices settled down more than US$1 a barrel on Tuesday at a four-year low as investors priced in an increasing likelihood of a recession due to the escalating trade war between the US and China, the world’s two biggest economies.
Brent futures settled down US$1.39, or 2.16 per cent, at US$62.82 a barrel. US West Texas Intermediate crude futures settled down US$1.12, or 1.85 per cent, at US$59.58.
The two benchmarks have slumped by 16 per cent since US President Donald Trump’s April 2 announcement of tariffs on all US imports.
The US will impose a 104 per cent tariff on China from 12.01 am EDT (0401 GMT) on Wednesday, a White House official said, adding 50 per cent more to tariffs after Beijing failed to lift its retaliatory tariffs on US goods by a noon deadline on Tuesday set by Trump.
Beijing vowed not to bow to what it called US blackmail after Trump threatened the additional 50 per cent tariff on Chinese goods if the country did not lift its 34 per cent retaliatory tariff.
China’s Commerce Ministry said the country would fight to the end, ratcheting up fears about a contraction of the global economy.
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Both oil benchmarks continued to fall in post-settlement trade. US crude futures dipped to US$57.88, while US stock indexes also broadly sank.
“The scenario has presented a case for a global recession, where fears of energy demand declining have emerged,” Alex Hodes, director of market strategy at financial services firm StoneX, said in a note.
US Trade Representative Jamieson Greer told US senators on Tuesday that China has not indicated it wants to work toward trade reciprocity.
Goldman Sachs forecast that Brent and WTI crude prices would be at US$62 and US$58 a barrel, respectively, by December 2025, and at US$55 and US$51, respectively, a year after that, under different scenarios.
The US administration has indicated a strong preference for reducing crude prices to US$50 or lower, considering this goal a top priority among its objectives, according to Natasha Kaneva, head of global commodities strategy at JPMorgan.
“This includes being willing to endure a period of industry disruption similar to the one experienced by the shale sector during the 2014 price war between Opec and shale, if it ultimately results in lower cost of oil production,” Kaneva said.
Iran talks
On Monday, Trump also made a surprise announcement that the US and Iran were set to begin direct talks on Tehran’s nuclear programme, but Iran’s foreign minister said the discussions would be indirect.
US Energy Secretary Chris Wright said on Tuesday that Iran can expect tighter sanctions if it does not come to an agreement with Trump on its nuclear programme.
“So absolutely, I would expect very tight sanctions on Iran, and hopefully drive them to abandon their nuclear programme,” Wright said in an interview on CNBC.
Meanwhile, US crude and distillate inventories fell while petrol stocks rose last week, market sources said, citing American Petroleum Institute figures on Tuesday.
Crude stocks fell by 1.1 million barrels in the week ended April 4, the sources said on condition of anonymity. Petrol inventories rose by 210,000 barrels and distillate stocks fell by 1.8 million barrels, they said.
Official weekly oil inventory data from the Energy Information Administration is due on Wednesday. REUTERS
