Oil down on OPEC+ output increase, tariffs war start, US pause in aid to Ukraine

Crude oil prices extended losses on Tuesday after reports of OPEC+ plans to proceed with output increase in April while further price pressure was applied by U.S. tariff on Canada, Mexico and China as well as Beijing and Canada’s retaliatory tariffs. Brent futures were down $1.04, or 1.45%, at $70.58 a barrel while U.S. West Texas Intermediate (WTI) crude was off 73 cents, or 1.07%, at $67.64. Brent was trading near a five-month low. “The current downward trend in oil prices is primarily driven by OPEC+’s decision to increase output and the introduction of U.S. tariffs,” said Darren Lim, commodities strategist at Phillip Nova. He said another factor was President Donald Trump’s decision to pause all U. S. military aid to Ukraine after his Oval Office clash with President Volodymyr Zelenskiy last week.
The Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia, known collectively as OPEC+, decided on Monday to proceed with a planned April oil output increase of 138,000 barrels per day, the group’s first since 2022. The move took the market by surprise, said Bjarne Schieldrop, chief commodities analyst at SEB. “The change in OPEC strategy looks like they are prioritising politics over price. Those politics are likely connected with the wheeling and dealing of Donald Trump,” Schieldrop said, referring to the U.S. president’s calls for lower oil prices. U.S. tariff of 25% on imports from Canada and Mexico took effect at 12:01 a.m. EST (0501 GMT) on Tuesday, with 10% tariffs on Canadian energy, while tariffs on imports of Chinese goods were increased to 20% from 10%. Analysts expect the tariffs to curb economic activity and demand for energy, weighing on oil prices.
As the U.S. tariffs kicked in on Tuesday, China swiftly retaliated, announcing 10-15% increases to import levies covering a range of American agricultural and food products while also placing 25 U.S. companies under export and investment restrictions. Further pressure on oil prices came from Trump halting military aid to Ukraine, with some in the market saying the growing distance between the White House and Ukraine raised the prospect of potential U.S. sanctions relief for Russia and more oil supply returning to the market. The pause to aid followed a Reuters report that the White House has asked the State and Treasury departments to draft a list of sanctions that could be eased for U.S. officials to discuss during talks with Moscow. “The perfect storm for crude oil has intensified. Reports that the U.S. has paused military aid to Ukraine are viewed as a precursor to lifting sanctions on Russian oil,” said IG market analyst Tony Sycamore.
“It also comes at the same time as U.S. tariffs on Canada, Mexico and China come into effect, sparking fears of a trade war. Crude oil just cannot take a break at the moment.” However, Goldman Sachs analysts said on Monday that Russia’s oil flows are constrained more by its OPEC+ production target than sanctions, warning that an easing might not boost them significantly. The bank also said that higher than expected crude supply and a demand squeeze from softer U.S. activity and tariff escalation posed downside risks to oil price forecasts. Chinese demand is also down, with a period of refinery maintenance looking, said Josh Callaghan, head of crude derivatives at Arrow Energy Markets