Double-whammy of trade wars and OPEC barrels sends crude plunging
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Oil prices slid to their lowest levels since 2021 Friday after China unveiled steep retaliatory tariffs, adding to Thursday's plunge on news of the White House trade war and more OPEC+ supply.
Why it matters: The swirling forces bringing the steep drop serve one White House goal (lower energy prices) while further impeding another (drill baby drill).
Driving the news: China will impose 34% tariffs on all U.S. goods, the nation's finance minister said Friday.
- On Thursday, OPEC+ said it would speed up the unwinding of some production curbs.
- The stated reason for adding 411,000 barrels per day in May, instead of 135k as planned, is healthy fundamentals (a debatable observation).
- Add trade battles that are bearish for demand and OPEC+ adding more barrels and you get Brent prices at $64.40 Thursday morning.
Between the lines: On OPEC+, RBC Capital Markets also sees internal politics to discourage some members including Kazakhstan and Iraq from overproduction as one reason behind the decision.
- But ClearView Energy Partners, in a note, sees some connection to Trump, who has previously called for more OPEC output.
- Oil was exempted from Trump's new tariffs. But his broader trade battles, and steps like last week's threat of secondary tariffs against buyers of Russian oil, could have influenced the group.
"Even if one discounts the idea that rumbles from Washington are enough to drive a production increase on their own, we suspect neither the Kingdom [of Saudi Arabia], the Kremlin nor other OPEC+ players will be disappointed if [Thursday's] decision has the effect of minimizing economic risks emanating from the White House," ClearView said.
