Oil continues to fall as fears of global recession grow

2025-04-07 20:33:00, Ekonomi CNA

Trump 'welcomes' oil price drop as he signals he's moving forward with sweeping tariffs

Oil prices fell further on Monday as US President Donald Trump signaled he would press ahead with sweeping global tariffs despite falling stock markets and rising fears of a recession.

Brent crude fell 2.5 percent to $63.94 a barrel by late afternoon in London - the lowest level in four years and a 15 percent drop over the past five days - in an indication of deepening concerns that the global economy is heading for a sharp slowdown.

Trump's tariff announcement last Wednesday was followed a few hours later by a surprise move by the OPEC+ coalition to increase oil production.

Some analysts said the drop in oil prices could make them too low for some of the highest-cost producers in the U.S., hampering Trump's promise to boost domestic production.

However, the president appears to welcome the decline in crude oil, as he pledged to lower costs for American consumers.

Trump wrote: "Oil prices are down, interest rates are down (the slow-moving Fed should cut rates!), food prices are down, there is NO INFLATION."

In a note on Sunday, Goldman Sachs analysts cut their oil price forecast, following economists predicting a “stagnant” U.S. economy and a higher risk of recession. They expect Brent crude to trade at an average of $58 a barrel in 2026 and West Texas Intermediate at $55 a barrel.

"The risks to our revised oil price forecast remain on the downside, as the risk of recession has increased further and OPEC+ supply could increase more than we assume," they added.

"Our economists have also increased the probability of a 12-month U.S. recession from 35 percent to 45 percent and have indicated that they will change their forecast to a recession if the White House implements most of the April 9 tariffs."

Morgan Stanley said the 12.5 percent drop in Brent crude between late Wednesday and late Friday last week had only happened 24 times before - 22 of which it said were linked to recessions, while it is cutting its baseline forecast for oil demand for the second half of this year by about 550,000 barrels per day.

The decision by the eight OPEC+ members to bring forward plans to cancel production cuts means they will increase output by 411,000 barrels per day in May, from a previous target of 122,000 barrels per day.

It followed tensions among members over varying degrees of compliance with production cuts, with Kazakhstan consistently pumping oil above its quota.

Shares in major UK-listed oil producers fell on Monday morning, with Shell down 7 percent and BP down 6 percent, underperforming the broader market./ Monitor Magazine