DTN Oil Update
Crude Oil Futures Plummeted 5% on Global Tariffs
HOUSTON (DTN) -- Oil futures plummeted Thursday morning in response to the announcement of sweeping trading tariffs imposed by the Trump administration on all countries, particularly on China, raising concerns about their impact on global economic growth and the possibility of a recession in the U.S.
The front-month NYMEX West Texas Intermediate futures contract for May delivery plunged by $5.17 to $66.54 bbl, while the May ICE Brent futures contract decreased by $5.02 to $69.93 bbl -- the highest drop for both benchmarks in one day so far in 2025. The May RBOB futures contract fell by $0.1754 to $2.1556, while the front-month ULSD futures contract rose by $0.1571 to $2.1649 gallon.
The U.S. Dollar Index also saw its steepest fall Thursday morning, dropping by 2.3% to 101.110 against a basket of foreign currencies, including the euro, Japanese yen, British pound, Canadian dollar, among others.
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U.S. President Donald Trump announced Wednesday, April 2, a 10% baseline tariff for all countries effective April 5 and unveiled additional reciprocal tariffs on China and the European Union, excluding Mexico and Canada for now.
During a conference at the White House, Trump announced sweeping tariffs on several countries trading with the United States, including an additional 34% trade tariff on imported goods from China, 20% on imports from the European Union, and a 24% import tax for Japan, among others. These tariffs will begin April 9.
In the last two months, the U.S. government has already imposed 20% tariffs on imports from China, 25% on steel and aluminum from Canada and Mexico, and 25% on imported goods from the European Union, all of which have responded with retaliatory tariffs against U.S. imports.
Additionally, the United States imposed a 25% trade tariff on foreign car imports, which will be effective Thursday, April 3.
"Higher-than-expected U.S. tariffs will drag on Chinese growth and inflation this year. China has been quite measured in its reaction to the first two rounds of tariffs. But a sharp 34% tariff escalation risks a stronger response both in terms of domestic stimulus and potential retaliation," said Lynn Song, chief economist at ING Research, in a note.
A setback in China's economic growth due to the tariff war with the U.S. will further affect the already weak global demand for energy products, as China is the world's main buyer of crude oil and gas.
Anticipating the impact of tariffs on oil trade, some analysts have already lowered their oil price forecast to an average of $70 bbl for 2025.
Abundant global oil supplies are putting pressure on oil futures Thursday morning, supported also by additional output from OPEC+ countries, which were expected to offer 2.2 million bbl more starting this week.
Domestically, Energy Information Administration (EIA) data showed on Wednesday a build in crude oil inventories in the United States, rising by 6.2 million bbl to 439.8 million bbl in the week ending March 28. This was slightly above the 6.1 million bbl build reported by API on April 1 for the same reference week.
