Brent and WTI crude oil prices fell to levels seen in the spring
Trump's tariff threat pushed oil prices to a five-month low. Brent and WTI futures fell more than $2 per barrel, or more than 3%, on Friday as the threat of further tariffs on China cast a shadow over the demand outlook in a market already experiencing oversupply.
OPEC production increased, with US production leading the oversupply.
Brent crude futures closed down $2.49, or 3.82%, at $62.73 per barrel, the lowest level since May 5.
WTI crude oil fell $2.61, or 4.24%, to $58.90 per barrel, the lowest level since early May.
Several factors, including Trump's threat of a major increase in tariffs on China, have come to a head.
Rising OPEC production, additional production gains in North and South America, and reduced geopolitical risks following the Gaza ceasefire agreement are among the factors that should be added to Trump's announcement of tariffs on China.
Trump, who is expected to meet with Chinese President Xi Jinping in South Korea in about three weeks, has complained about China's plans to hold the global economy hostage after China significantly increased export controls on rare earths, which are vital for technology production and for which it holds a dominant market.
But Trump not only considered canceling the meeting with Xi, he also threatened to impose a significant tariff increase on Chinese goods.
Israel and the Palestinian militant group Hamas signed a ceasefire agreement on Thursday as the first phase of Trump's plan to end the war in Gaza. However, the Israeli government announced its approval on Friday.
Under the agreement, the fighting will end, Israel will partially withdraw from Gaza, and Hamas will release all hostages it captured in the attack that started the war in exchange for hundreds of prisoners held in Israel.
The Iran-backed Houthis have attacked numerous ships since 2023. The Houthis stated their solidarity with the Palestinians regarding the war in Gaza and targeted ships they perceived as affiliated with Israel.
The lower-than-expected November production increase agreed upon by the Organization of the Petroleum Exporting Countries (OPEC+) on Sunday has alleviated some concerns about oversupply.
While the Gaza ceasefire agreement was expected to remove Middle East geopolitics from the equation, the focus has shifted to concerns about oversupply resulting from the reversal of OPEC+ production cuts.
While this is nothing new, market expectations of a sharp increase in crude oil supply have not been significantly reflected in prices.
Investors are also concerned that a prolonged U.S. government shutdown could negatively impact the American economy and negatively impact oil demand in the country, the world's largest consumer of crude oil.
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