LONDON

In a dramatic turn of events, oil prices are on track to close at their lowest levels since the height of the COVID-19 pandemic in 2021. On Friday, prices were significantly impacted by new tariffs implemented by U.S. President Donald Trump, alongside an announced increase in production by the OPEC+ producer group.

Brent crude futures experienced a sharp decline, plunging by $2.29, or 3.3%, hitting $67.85 per barrel by 09:48 GMT. Similarly, U.S. West Texas Intermediate (WTI) crude futures fell by $2.32, approximately 3.5%, to $64.63. Both benchmarks are poised for their largest weekly losses in percentage terms in the past six months.

The situation escalated following Trump's announcement on Wednesday regarding tariffs, leading to immediate ramifications not just for oil but for global markets. Investors reacted by flocking to safer assets such as bonds, the Japanese yen, and gold, amidst concerns over economic stability. The dollar index, reflecting the strength of the U.S. currency against six others, dropped to 102.98 — its lowest since mid-October, highlighting widespread concern in the financial landscape.

John Evans, an oil broker at PVM, commented, 'With Trump's tariffs and OPEC+'s output increase, the oil complex had little choice but to yield to a level of selling reminiscent of the pandemic collapse.' This selling frenzy extended its reach into Asian markets as the trading day progressed.

A key factor in the oil price drop is the OPEC+ decision to accelerate production increases, with plans to bring an additional 411,000 barrels per day back to the market in May, a significant rise from the previously planned 135,000 barrels per day. This sudden escalation in supply comes at a time when global demand recovery is under scrutiny.

While oil, gas, and refined products were exempt from the new tariffs, economic analysts warn that these tariffs could contribute to inflation, hinder economic growth, and exacerbate ongoing trade disputes, ultimately putting downward pressure on oil prices.

In light of these developments, Goldman Sachs significantly revised its oil price forecasts, slashing predictions for December 2025 Brent and WTI crude by $5 each, to $66 and $62 respectively. Daan Struyven, the bank's head of oil research, emphasized that the outlook for oil prices carries a downside risk, given mounting recession fears alongside increasing OPEC+ supplies.

However, there may be a glimmer of hope on the horizon. Analysts at Rystad Energy project a potential rebound in oil prices in the months ahead. Mukesh Sahdev, Rystad's global head of commodity markets, stated, 'Given the likelihood of supply disruptions stemming from sanctions and tariffs affecting both sellers and buyers, it’s unlikely that oil prices will remain below $70 for much longer.'

As the market continues to react to these overwhelming pressures, all eyes are on the coming weeks to see if oil can reclaim its standing amidst global economic uncertainties. Why is everyone holding their breath? Stay tuned!