Oil Prices Drop as Tariff War Sparks Recession Fears

During the session, Brent crude futures went down by 40 cents or 0.5 per cent to $73.63 a barrel and the US West Texas Intermediate crude futures (WTI) dropped 56 cents or 0.8 per cent to close at $69.36 a barrel.

The US President, Mr Donald Trump, plans to announce reciprocal tariffs targeting a wide range of imports, effective April 2.

For instance, JPMorgan analysts said in a note to its clientele that the trade war has investors worried about a potential recession.

“Concerns about a trade war, coupled with elevated U.S. policy uncertainty, are weighing heavily on sentiment,” the bank said.

It added that although the risk of recession was elevated, high-frequency oil demand indicators have held up relatively well for now.

Regardless, the possibility sent jitters to traders.

Meanwhile, traders continued to look at escalating US sanctions on Venezuela and Iran.

The Trump administration’s decision to impose a 25 per cent tariff on countries importing Venezuelan crude sent ripples through the physical market.

India’s Reliance Industries, the operator of the world’s largest refining complex, halted Venezuelan imports in response, reinforcing fears of a looming supply squeeze.

Also, the US renewed enforcement of Iranian oil sanctions—targeting refiners and shipping linked to China—further tightened available barrels.

The US has issued four rounds of sanctions targeting Iran’s oil sales since Mr Trump’s return to the White House.

The combined impact from both measures threatens to cut off hundreds of thousands of barrels per day from the global market, with Chevron’s potential 200,000 barrels per day production loss in Venezuela adding to the pressure.

The Trump administration extended the deadline to May 27 for US producer Chevron to wind down operations in Venezuela.

In addition, the Organisation of the Petroleum Exporting Countries and allies (OPEC+) will likely stick to its plan to raise oil output for a second consecutive month in May.