Oil prices tumbled to their lowest level in more than four years on Wednesday as escalating trade tensions and unexpected supply increases from Opec+ rattled global markets.
Brent crude, the international benchmark, dropped as much as 5.2% to $58.46 a barrel, falling below the $60 mark for the first time since February 2021.
The sharp fall came amid growing fears that President Trump’s sweeping global tariffs, introduced on 2 April, would dampen global growth and suppress energy demand. At its lowest point, Brent had slumped nearly 20% from its level when the tariffs were first announced.
The US benchmark, West Texas Intermediate (WTI), also dropped as much as 5.3% to $55.10, before rebounding to $62, up 4% on the day. Brent crude ended the day at $64.82, up 3.5%, after markets rallied in response to Trump’s surprise decision to pause tariff increases for 90 days — excluding China.
Adding to the pressure on oil prices was a larger-than-expected production increase by Opec+ — the alliance of major oil-producing countries including Saudi Arabia, Russia and Iraq. The group announced a combined output boost of 411,000 barrels per day from May, far higher than the 135,000 barrels per day analysts had forecast.
This twin blow — weaker demand expectations due to tariffs and rising supply — prompted major banks to slash oil price forecasts. Goldman Sachs cut its Brent forecast for year-end to $58 per barrel, and to $51 by the end of next year, marking the third downgrade in recent months.
Morgan Stanley also reduced its outlook, lowering its Brent crude forecast by $5 a barrel to $65 for Q2, and $62.50 for both Q3 and Q4. The bank cut its oil demand forecast for the second half of the year by 500,000 barrels per day.
Francisco Blanch, Head of Commodities Research at Bank of America, warned Brent could sink to $50 a barrel in a worst-case scenario — though added that any easing of trade tensions or geopolitical risks could stabilise prices.
The plunge in oil has prompted speculation of falling fuel prices for motorists. Simon Williams, head of policy at the RAC, said wholesale fuel costs were “falling fast”, putting pressure on major retailers to cut pump prices.
“We expect to see the first of these price cuts taking place later this week as the largest retailers buy in new stock,” he said.
Average petrol prices have remained broadly flat at 135.6p a litre, while diesel is unchanged at 142.3p, according to AA figures.
Luke Bosdet, fuel spokesman at the AA, cautioned that falling oil prices may take time to reach forecourts, particularly given the start of the American summer driving season, when US gasoline demand — and prices — typically rise.
“If I have any hope of a big fall in pump prices, it comes later in the summer when the reality of US holidaymakers travelling less hits gasoline demand and brings down its commodity value,” he said.
Rising operating costs, including increases in employer national insurance contributions and the national living wage, may also limit how much of the wholesale savings are passed on to UK consumers, analysts warned.
While markets responded positively to the temporary de-escalation of the trade dispute, the energy sector remains on edge. With supply rising and economic uncertainty growing, volatility in oil markets is unlikely to disappear anytime soon.
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