DTN Oil Update
Oil Futures Dip Amid Tariffs and Recession Concerns
HOUSTON (DTN) -- Oil futures plunged for the third consecutive trading session on Monday, with the NYMEX WTI futures contract for May delivery hitting the $59 bbl mark in the morning before settling at $61 bbl. The bearish sentiment was driven by expectations of a recession in the U.S. economy due to the trade war, amid weak global oil demand.
The confirmation that OPEC+ countries were offering additional oil production of 2.2 million bpd starting last week also put pressure on the oil futures markets on Monday.
Last Saturday, April 5, OPEC's Joint Ministerial Monitoring Committee (JMMC) met via videoconference to review crude oil production data for January and February from countries within the oil cartel and reaffirmed that it will continue to monitor adherence to the production adjustments agreed upon in past meetings.
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Meanwhile, market participants continued assessing the impact of a 10% global tariff imposed by the United States on all countries, which became effective on Saturday, April 5. This increase in tariffs has raised concerns about a global growth slowdown and the potential for a recession in the U.S. economy.
Last week, U.S. President Donald Trump announced a 10% baseline tariff on all imports, effective April 5, in addition to specific tariffs targeting China and the European Union. Imports from Mexico and Canada are exempt for now.
In addition to the global trade tax, the Trump administration levied a 34% tariff on imported goods from China, which previously were levied with a 20% tariff, while imports from the EU are expected to face a trade tariff of 20%, and Japan will see 24% tariffs. These tariffs are set to take effect on April 9.
In response to those measures, China's Customs Tariff Commission said Friday it will impose a retaliatory 34% tariff on all U.S. imports starting April 10.
Monday, President Trump threatened an additional 50% tariff on China and terminate negotiations if the Chinese government fails to withdraw its retaliatory tariffs on the United States.
In the past two months, the United States has already implemented tariffs of 20% on Chinese imports, 25% on steel and aluminum from Canada and Mexico, and 25% on EU goods. Each of these regions has responded with tariffs of their own on U.S. exports.
Meanwhile, economists and analysist have announced they will revise their forecasts for the U.S. GDP on expectations of a potential recession driven by the trade war.
The front-month WTI crude contract for May delivery on the NYMEX dropped by $0.99 to $61.00 bbl, while the June ICE Brent futures contract decreased to $64.48 bbl, a $1.01 fall from the previous trading session.
Downstream, the front-month RBOB futures contract declined by $0.0290 to $2.0255 bbl and the ULSD futures contract for May delivery dropped by $0.0052 to $2.0767 bbl.
In contrast, the U.S. Dollar Index recovered from earlier losses, increasing 0.25% to 103.01 against a basket of foreign currencies.
