DTN Oil Update
Oil Futures Plunged Amid Global Tariffs, Recession Outlook
HOUSTON (DTN) -- Oil futures plummeted for the third consecutive trading session Monday morning, after a 10% global tariff imposed by the United States on all countries 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.
"Consumers will face higher costs of about 2.5% of household spending. The increase in domestic production, jobs and wages will not compensate for the negative effects. We will be lowering our (U.S.) GDP outlook. We expect the Federal Reserve will hold rates first and start cutting -- more than expected -- later in the year. Longer rates are and will remain lower as the outlook deteriorates. More forecasters are now expecting a recession," said Marieke Blom, chief economist and global head of research for ING Research, in a note.
The front-month WTI crude contract for May delivery on the NYMEX fell to $61.05 bbl, a decrease of $0.94. June ICE Brent decreased to $64.67 bbl, a $0.91 drop from the previous trading session.
The May RBOB futures contract was at $2.0376 gallon, down by $0.0169. May ULSD futures settled at $2.0708, down $0.0111.
The U.S. Dollar Index fell by 0.16% to 102.605 against a basket of foreign currencies, including the euro, yen, pound and Canadian dollar.
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, in addition to the 20% previously imposed, while imports from the EU will 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.
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.
A separate 25% tariff on foreign car imports took effect Friday, April 4.
The high volatility and bearish sentiment in the oil futures market is also fueled by increased oil output from OPEC+ countries, which began pumping an additional 2.2 million barrels per day last week.
