(Corrects the settlement of Brent at its lowest point since May 7, rather than May 5, in paragraph 3)
By Erwin Seba
HOUSTON (Reuters) – On Friday, Brent and U.S. crude futures dropped over $2 per barrel, translating to a decline of more than 3%. This market reaction followed U.S. President Donald Trump’s warning about raising tariffs on China, raising concerns regarding demand in a market already perceived as oversupplied.
“This sell-off can be attributed to a broader move away from risk in the markets triggered by Trump’s tariffs announcement concerning Chinese imports,” explained Giovanni Staunovo, an analyst at UBS.
Brent crude futures concluded at $62.73 per barrel, a decrease of $2.49 or 3.82%, marking the lowest price since May 7.
U.S. West Texas Intermediate crude settled at $58.90 a barrel, falling by $2.61, or 4.24%, reaching its lowest level since early May.
“Today’s market turbulence is a result of multiple influences, with Trump’s recent tariff threats against China being the latest in a series of concerning developments,” commented Andrew Lipow, president of Lipow Oil Associates.
OPEC’s output increases, additional production rises from North and South America, alongside the diminished geopolitical risks following the ceasefire in Gaza, “all contribute to the context surrounding Trump’s tariff announcement this morning,” Lipow noted.
As Trump prepared to meet Chinese President Xi Jinping in approximately three weeks in South Korea, he expressed discomfort on social media regarding what he perceives as China’s efforts to jeopardize the global economy. This follows China’s significant expansion of its export restrictions on rare earth elements on Thursday, essential for technology manufacturing.
In light of these tensions, Trump signposted that he might cancel his meeting with Xi, hinting further at a potential substantial hike in tariffs on Chinese goods.
Recently, Israel and Hamas, the Palestinian militant organization, established a ceasefire agreement, marking the beginning of Trump’s initiative to resolve the Gaza conflict.
The terms of the agreement ratified by the Israeli government on Friday include a cessation of hostilities, a partial withdrawal of Israeli forces from Gaza, and the release of remaining hostages held by Hamas, in return for hundreds of Palestinian prisoners held by Israel.
Since 2023, the Iran-aligned group of Houthis in Yemen has targeted several vessels, attacking ships they associate with Israel in what they describe as an act of solidarity with the Palestinians amid the Gaza conflict.
The ceasefire in Gaza allows attention to shift back to the expected oil surplus, as OPEC starts to roll back its production cuts, according to Daniel Hynes, an analyst at ANZ.
The smaller-than-anticipated increase in output for November, agreed upon by OPEC and its allies (OPEC+), has somewhat alleviated the fears of oversupply in the marketplace.
