Oil tumbles amid OPEC+ supply hike, tariffs, US-Ukraine aid uncertainty

Onome Amuge

Crude oil prices continued to slip on Tuesday as markets weighed the prospect of higher OPEC+ output and the looming imposition of U.S. tariffs on its key trade partners, including Canada, Mexico, and China.

The development of OPEC+ sticking to its plan for a production increase in April fueled investor concerns over a potential supply glut, adding pressure on oil prices. At the same time, markets braced for the rollout of U.S. tariffs and the looming retaliation from Beijing

Brent crude futures tumbled 90 cents, a 1.26 percent decrease, to settle at $70.72 a barrel, while WTI crude futures fell 79 cents, or 1.16 percent, at $67.58 a barrel. 

According to Darren Lim, a commodities strategist at Phillip Nova, the recent drop in oil prices reflects a confluence of factors, with OPEC+’s decision to ramp up production and the imposition of U.S. tariffs acting as primary catalysts for the decline.

Lim also highlighted Trump’s recent decision to freeze military aid to Ukraine following a contentious meeting with President Zelenskiy as another source of investor concern.

OPEC+’s decision to increase production by 138,000 barrels per day in April, the first such increase since 2022, has triggered alarm bells in the market, as it raises the specter of a potential surplus in global oil supplies.

Commenting on the situation, commodities strategist Darren Lim noted that OPEC+’s decision to gradually increase output is part of a long-term plan to ease previous production cuts.

The U.S. imposed tariffs of 25 percent on imports from both Canada and Mexico, and increased tariffs on imports from China to 20 percent, effective on Tuesday, fueling market anxiety over potential economic downturn and reduced fuel demand.

Shortly after the U.S. tariffs took effect on Tuesday, China wasted no time in responding with a retaliatory set of tariffs and restrictions aimed at American exporters.

The Chinese government imposed a 10 percent to 15 percent increase in import tariffs on a range of U.S. agricultural and food products, as well as placing 25 U.S. companies on a list of entities subject to export and investment restrictions.

With these tariffs now in place, analysts predict that the trade measures will affect economic activity in the U.S. and its trading partners, leading to reduced demand for energy and further downward pressure on oil prices.

In addition to the developments in the trade arena, oil prices were also impacted by President Trump’s decision to halt military aid to Ukraine.

This move has raised concerns in the market that the White House is distancing itself from Ukraine, potentially paving the way for a de-escalation of tensions and an easing of sanctions against Russia.