Oil prices fell for a second consecutive day in early trading on Tuesday as global markets reacted to U.S. trade policies and concerns over slowing economic growth. The drop came amid growing fears that tariffs imposed by the United States on Canada, Mexico, and China would weaken the global economy and reduce energy demand, even as OPEC+ moves to ramp up supply.
Brent crude futures fell 29 cents, or 0.42%, to $68.99 per barrel at 0016 GMT, while U.S. West Texas Intermediate (WTI) crude lost 36 cents, or 0.55%, to $65.67 per barrel. The price declines reflect investor anxiety over the impact of trade tensions on economic activity and fuel consumption.
U.S. President Donald Trump’s aggressive stance on trade has rattled financial markets worldwide. The administration has imposed and then delayed tariffs on Canada and Mexico, two of the country’s largest oil suppliers. At the same time, tariffs on Chinese goods have been increased, leading to retaliatory measures from Beijing and Ottawa.
The uncertainty surrounding U.S. trade policies has created volatility across multiple sectors. Over the weekend, Trump acknowledged the possibility of a “period of transition” for the economy but refrained from speculating on whether a recession was imminent. His remarks added to investor unease, leading to further selling in financial and commodity markets.
“Trump’s comments triggered a wave of selling as investors started pricing in the risk of weaker growth in demand,” said Daniel Hynes, senior commodity strategist at ANZ.
On Monday, U.S. stock markets suffered sharp declines, reflecting concerns over slowing economic activity. The S&P 500 posted its largest one-day drop since December 18, while the Nasdaq fell 4%, its biggest single-day percentage loss since September 2022. Given the historical correlation between equity markets and crude prices, oil followed stocks lower.
U.S. Commerce Secretary Howard Lutnick reinforced the administration’s firm stance, stating on Sunday that Trump had no plans to ease tariffs on Mexico, Canada, and China. This declaration further dampened market sentiment, increasing fears of an extended trade conflict.
While demand concerns weigh on prices, supply-side dynamics are also shaping the oil market. Russia’s Deputy Prime Minister Alexander Novak announced on Friday that the OPEC+ alliance had agreed to increase oil production starting in April. The decision to raise output comes despite uncertainties about demand, adding downward pressure on crude prices.
However, Novak also suggested that the group could reverse course if market conditions warranted it. This flexibility highlights OPEC+’s ongoing efforts to balance supply and demand while preventing excessive price swings.
The OPEC+ move signals a shift in strategy, as the group had previously focused on production cuts to support prices. With rising supply from non-OPEC producers, including U.S. shale, the alliance appears to be adapting to new market realities.
In the United States, crude oil stockpiles were expected to have risen last week, while gasoline and distillate inventories likely declined, according to a preliminary Reuters poll. Rising crude inventories suggest a potential surplus in the market, adding to the bearish sentiment.
Traders will be closely watching inventory data set for release later this week. The American Petroleum Institute (API) is scheduled to report industry stockpile estimates at 4:30 p.m. EDT (2030 GMT) on Tuesday, followed by the Energy Information Administration (EIA) report at 10:30 a.m. EDT (1430 GMT) on Wednesday. These reports will provide insight into the supply-demand balance and could influence price movements in the coming days.
As the global economy grapples with the impact of trade disputes and shifting energy policies, oil markets remain highly sensitive to geopolitical developments. The interplay between trade policies, economic growth, and supply decisions by OPEC+ will continue to dictate price trends in the near term.
If economic growth slows due to prolonged trade conflicts, energy demand is likely to weaken further, putting additional pressure on prices. Conversely, any signs of a resolution in trade disputes or stronger-than-expected demand data could provide some support to the market.
For now, investors remain cautious, closely monitoring trade developments, economic indicators, and energy market trends. The coming weeks will be critical in determining the trajectory of oil prices as markets navigate ongoing uncertainties.
