Crude oil prices took a sharp dive on Wednesday, with Brent crude dropping to $60 per barrel from around $63 the previous day, amid escalating trade tensions between the United States and China.
Reuters reports that Brent futures slid by $2.36, or 3.76%, to $60.46 per barrel, while US West Texas Intermediate (WTI) crude fell by $2.37, or 3.98%, to $57.21.
This steep decline in oil prices poses a threat to the 2025 budget and could severely affect profit margins for both international and Nigerian oil producers, particularly given Nigeria’s high production costs.
The plunge follows China’s announcement of new retaliatory tariffs against the US. In response to President Donald Trump’s tariff policies, China’s finance ministry said it would raise tariffs on US goods from 34% to 84%, effective Thursday.
Analysts warn that the intensifying trade war is heightening fears of a global economic downturn. Giovanni Staunovo, a UBS analyst, told Reuters that while oil demand has not yet declined, fears of weakening demand in the near future are pushing prices lower to encourage supply cuts and prevent an oversupplied market.
In solidarity with China and Canada, the European Union also announced a 25% tariff on a range of US imports on Wednesday as part of their initial countermeasures.
“The aggressive stance by China lowers the likelihood of a quick resolution between the world’s two largest economies, deepening concerns of a global recession,” said Ye Lin, Vice President of Oil Commodity Markets at Rystad Energy. He noted that China's oil demand growth—estimated at 50,000 to 100,000 barrels per day—is at risk if the trade dispute persists. However, domestic stimulus efforts could help offset the losses.
Brent and WTI have now declined for five consecutive sessions since Trump unveiled broad tariffs on most imports, raising alarms over slowing economic growth and reduced fuel consumption.
Some US analysts speculate that the White House might be aiming to push oil prices closer to $50 per barrel, betting that the domestic oil and gas industry can withstand short-term volatility. Ashley Kelty, an analyst at Panmure Liberum, echoed this sentiment.
In a partial shift, President Trump announced on Tuesday a 90-day suspension on many of the reciprocal and 10% tariffs he introduced last week, though tariffs targeting China have been raised further. His initial announcement last Wednesday had already sent shockwaves through global markets, triggering a sharp sell-off in stocks.
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