Oil prices extended their downward trend following Trump’s threat to impose a 50% tariff on European goods, raising concerns over falling demand amid rising supply.
Oil prices continued their downward trajectory this week after the U.S. President proposed imposing a 50% tariff on European imports. This trade threat has heightened concerns about weakening global oil demand amid persistently increasing supply.
Continued Decline in Oil Prices
The oil market witnessed further declines this week as Brent crude fell below $64 per barrel for the fourth consecutive session. This price drop followed statements by U.S. President Donald Trump, who threatened to implement a 50% tariff on imports from the European Union starting June 1. This new threat has revived worries about escalating trade tensions and their adverse impact on the global economy and crude oil demand.
Trump’s Tariff Threat and Its Market Impact
Trump announced on his official social media platform, Truth Social, that dealing with the EU had been “very difficult,” and he intended to propose imposing hefty tariffs. Such actions could have widespread ramifications for international trade, potentially dampening oil demand—particularly amid a market where oil supplies continue to grow steadily.
Rising Supply Puts Additional Pressure on Prices
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) and its allies are contemplating an increase in oil production quotas for the upcoming months. Although no formal agreement has been reached yet, a virtual meeting is scheduled for June 1 to decide on this matter. This anticipated increase is exerting further downward pressure on oil prices.
Ole Hansen, Head of Commodity Strategy at Saxo Bank, noted, “Oil prices dropped by about a dollar following Trump’s renewed tariff threats, with investor sentiment in the oil market taking a hit.” He added that concerns over tariff hikes on Europe have reduced market risk appetite.
Oil’s Downward Trend Throughout the Year
Crude oil prices have fallen roughly 15% year-to-date, hitting their lowest level since 2021 last month. This decline has been driven by faster-than-expected easing of supply restrictions by OPEC+ alongside the headwinds created by the U.S.-led tariff war, which has pressured global oil demand.
Increasing U.S. Oil Inventories and Market Concerns
Beyond trade tensions, recent data indicate a rise in U.S. commercial oil inventories, fueling concerns about market oversupply. This development has added to the bearish sentiment prevailing in the oil market.
Geopolitical Developments Affecting Oil Markets
On the geopolitical front, reports from CNN revealed that U.S. intelligence suggests Israel is preparing for a potential strike on Iranian nuclear facilities. This news caused a brief uptick in oil prices. However, Iran’s Foreign Minister Abbas Araghchi stated that a deal could be reached in which Tehran would forgo nuclear weapons but continue uranium enrichment.
OPEC+ Meeting and Market Outlook
The group of eight OPEC+ countries, led de facto by Saudi Arabia, is set to hold a virtual meeting on June 1 to finalize production levels for July. According to trader and analyst surveys, most expect another increase in production, which would add further downward pressure on prices.
In summary, the short-term outlook for the oil market remains influenced by multiple factors, including escalating tariff disputes, geopolitical tensions, and OPEC+ production policies, making a continuation of the current downward price trend likely.
