Oil prices extend steep declines after China announces tariffs on U.S. goods

Investing.com-- Oil prices fell sharply Friday, continuing the previous session’s selloff as China responded to U.S. President Donald Trump’s barrage of levies this week, lifting worries about a global trade war and potential recession.

At 09:05 ET (13:05 GMT), Brent Oil Futures expiring in June fell 6.3% to $65.74 per barrel, while West Texas Intermediate (WTI) crude futures declined 7.1% to $62.20 per barrel.

Both contracts had declined more than 6% on Thursday, and are now heading for their lowest close since the midst of the coronavirus pandemic in 2021.

China reciprocates with its own tariffs

China announced earlier Friday it will impose additional tariffs of 34% on all U.S. goods from April 10. hitting back after President Trump had earlier this week raised tariff barriers to their highest in more than a century, raising fears that the global economy would be plunged into a recession.

“Risk appetite took another big hit as China struck back with fresh tariffs of its own,” said Fawad Razaqzada, market analyst at Forex.com.

President Donald Trump’s recent announcement of sweeping tariffs has also significantly impacted global oil prices, as they have intensified fears of a global economic recession. Such an environment could diminish industrial activity and reduce consumer spending, leading to a decreased demand for oil.

The imposition of hefty tariffs on China, a major consumer and importer of crude oil, is also concerning. 

China’s significant role in the global energy market means that these tariffs could lead to a substantial reduction in its oil imports. 

OPEC+ to ramp up output, sparks oversupply concerns

Sentiment surrounding the crude market had already been weak after eight members of OPEC+, the group which includes the Organization of Petroleum Exporting Countries and allies led by Russia, on Thursday announced plans to accelerate production increases.

The cartel agreed to boost output by 411,000 barrels per day, a faster pace than previously planned. 

"Possibly, the group feels that the prospect of stricter sanctions against Venezuela and Iran allows them to increase supply. Or maybe President Trump has been successful in convincing the Saudis to increase supply," said analysts at ING, in a note.

"There have also been suggestions that the group seeks to punish producers that consistently produced above their targets. Either way, this brings forward the expected surplus that we see in the oil market this year."

The sharp decline in oil prices reflects investor concerns that the additional supply could outstrip demand, especially as economic uncertainties persist. 

High interest rates, slowing global growth, and China’s uneven economic recovery have raised doubts about whether demand can keep up with rising production levels. 

U.S. payrolls rose in March

On the data front, the U.S. economy added more jobs than anticipated in March, but the previous month’s figure was revised sharply lower and the unemployment rate rose, adding to the economic uncertainty as Federal Reserve officials attempt to determine the path ahead for interest rates.

Nonfarm payrolls for the month came in at 228,000, a jump from the revised lower 117,000 in February, data from the Labor Department’s Bureau of Labor Statistics showed on Friday.

Economists had anticipated 137,000 jobs in March, while the February figure has previously been 151,000.

Meanwhile, the unemployment rate was 4.2%, a rise from February’s 4.1% pace.

Investors now await a speech by Federal Reserve Chair Jerome Powell for insights into the health of the U.S. economy and the direction of monetary policy.

The Federal Reserve maintained its benchmark overnight interest rate steady in the 4.25%-4.50% range at its March meeting, citing the high economic uncertainty.

The policymakers now appear to be caught between an almost certain spike in consumer prices and the mounting risk of recession as consumers and businesses cut back. 

(Ayushman Ojha contributed to this article.)