In This Article:
(Bloomberg) -- Oil tumbled to a four-year low, following a surprise output increase by OPEC+ and a rapidly escalating global trade war that’s also rattling commodities markets from metals to gas.
Most Read from Bloomberg
-
Metro-North Is Faster Than Acela on NYC-New Haven Route After Signal Updates
-
London Clears Final Hurdle for More High-Speed Trains to Europe
Oil’s rout was triggered Thursday by US President Donald Trump deluge of tariffs, which threaten the global economy and energy consumption. Hours later, OPEC+ tripled a planned output hike for May, in what delegates called a deliberate effort to lower prices to punish members that were pumping above their quota.
West Texas Intermediate futures have fallen about 14% in just two days — settling near $61 a barrel in a move similar to steep losses seen during the pandemic — while Brent also ended the day at the lowest since 2021. The declines were exacerbated on Friday by China’s retaliation against the US duties, including a 34% tariff on all imports from the US starting within a week.
Other commodities also slumped as wider financial markets took a hit and fears mounted about weaker demand for raw materials. Copper slid as much as 7.7% to the lowest since January, while benchmark European natural gas futures at one point tumbled more than 10%. Glencore Plc shares plunged more than 9%, with fellow major miners BHP Group and Rio Tinto Group also sliding.
Oil’s retreat represented a dramatic breakout from a price band of about $15 that has paralyzed trading and spurred bets on low volatility for much of the last six months. During that period, OPEC+ supply curbs were seen to put a floor under the market, while the group’s ample spare capacity acted as a ceiling. This week’s unexpected production increase raises questions about whether the alliance will continue to defend higher prices.
The dual hit from OPEC+ and tariffs has prompted a rush by traders and Wall Street banks to reassess their outlook for the market. Goldman Sachs Group Inc. and ING Groep NV are among those lowering their price forecasts, citing risks to demand and higher supplies from the producer group.
“The two key downside risks we have flagged are realizing: namely tariff escalation and somewhat higher OPEC+ supply,” Goldman analysts including Daan Struyven wrote in a note. “Price volatility is likely to stay elevated on higher recession risk.”
At its lowest point on Friday, global benchmark Brent was down more than $10 over the last two days, a scale of decline that would have put it in the 10 largest ever and on a par with some of the steep drops during the pandemic and when prices retreated away from $100 after Russia’s invasion of Ukraine.