Oil at four-year low as US hits China with 104% tariff

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Oil prices dropped to their lowest in more than four years in early trade on Wednesday fuelled by an escalating tariff war between the US and China, the world’s two biggest economies, and a rising supply outlook.

Brent futures lost $2.13, or 3.39 percent, to $60.69 a barrel as of 01:08 GMT. US West Texas Intermediate (WTI) crude futures fell $2.36, or 3.96 percent, to $57.22. Brent touched its lowest since March 2021 and WTI its lowest since February 2021.

Both benchmarks have tumbled over the five consecutive sessions since US President Donald Trump announced sweeping tariffs on most imports sparking concerns a global trade war would dent economic growth and hit fuel demand.

The US will impose a 104 percent tariff on China from 04:01 GMT on Wednesday, a White House official said in a Tuesday briefing, adding 50 percent more to tariffs after Beijing failed to lift its retaliatory tariffs on US goods by a noon deadline on Tuesday set by Trump.

Beijing vowed not to bow to what it called US blackmail after Trump threatened the additional 50 percent tariff on Chinese goods if the country did not lift its 34 percent retaliatory tariff.

“China’s aggressive retaliation diminishes the chances of a quick deal between the world’s two biggest economies, triggering mounting fears of economic recession across the globe,” said Ye Lin, vice president of oil commodity markets at Rystad Energy.

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“China’s 50,000 bpd to 100,000 barrels per day (bpd) of oil demand growth is at risk if the trade war continues for longer, however, a stronger stimulus to boost domestic consumption could mitigate the losses,” she said.

Excerbating oil’s decline was a decision last week by Opec+, which groups together the Organization of the Petroleum Exporting Countries and allies including Russia, to hike output in May by 411,000 barrels per day, a move that analysts say is likely to push the market into surplus.