Oil prices plummet to four-year low amid escalating US-China trade tensions

Thursday 10 April 2025 - 09:20

By: Dakir Madiha

Oil prices plummet to four-year low amid escalating US-China trade tensions

Oil prices have fallen to their lowest levels in four years as escalating trade tensions between the United States and China create alarming fears over the global economy. The latest developments were triggered by Washington's implementation of extensive new tariffs, which have reverberated across commodity markets.

The downturn in oil prices is part of a broader slide affecting various commodities, including coffee and copper. This situation has emerged following a significant escalation in the US-China trade dispute, characterized by the introduction of a 104% tariff on specific Chinese imports. The tariffs took effect shortly after midnight, intensifying concerns about diminishing global demand.

US President Donald Trump has positioned this tariff measure as integral to his “Liberation Day” agenda, a comprehensive strategy aimed at imposing substantial tariffs on China and other trading partners. During a recent campaign dinner, Trump defended the move, asserting that it was time for the US to counteract what he described as years of unfair trade practices.

Markets reacted negatively, with Asian and European exchanges closing lower. Analysts from ANZ noted that oil prices continued to extend losses due to the escalating trade conflict, while copper prices saw a nearly 10% decrease since the announcement of the tariffs.

The decline in crude oil prices has been stark, with approximately a 20% drop since early April, marking the steepest downturn in over two years. Brent crude fell to $60.31 a barrel, down 2.5%, while West Texas Intermediate reached $57.02.

Market analyst Ole Hvalbye from SEB attributed this decline to a combination of reduced demand expectations and OPEC+’s quicker-than-expected easing of production limits. “It’s a toxic mix,” he stated, highlighting the uncertainty flooding the market.

In light of the downturn, Morgan Stanley has revised its oil forecasts, lowering its estimates for Brent crude to $65 for the second quarter and $62.50 for both the third and fourth quarters.

The ramifications of the trade dispute also affected soft commodities, with coffee prices plunging significantly. Both robusta and arabica varieties have reached four-month lows, while cocoa prices have slipped to their lowest levels in five months in London and New York. Market consultant Michael J. Nugent remarked that the bullish momentum in coffee has likely stalled, attributing this to ongoing tariff concerns.

Copper, a key indicator of industrial demand, has also seen a continued decline. On the London Metal Exchange, three-month copper prices dipped to $8,650.50 per metric ton, reflecting a significant drop from over $10,000 in late March. Chinese copper contracts experienced similar pressure due to the new US tariffs targeting Beijing.

Meanwhile, natural gas prices in Europe have weakened, with the Dutch front-month contract falling 2.3% to €34.80 per megawatt hour. This decrease is attributed to broader market unease and shifting supply expectations.

In contrast to the general downward trend, gold prices rose by 2% as investors sought refuge in safer assets. Soybean prices also experienced a rebound for the third consecutive session, supported by rising prices in Brazil and a softer US dollar.

Despite these few exceptions, the overall outlook remains precarious. With trade tensions escalating and new US tariffs intensifying, markets are bracing for further turbulence in the near future.