Trump’s tariff threat pushes oil to its lowest level in five months

(Corrects Brent selloff to lowest level since May 7, not May 5, in paragraph 3)

By Erwin herself

HOUSTON (Reuters) – Brent and U.S. crude oil futures fell more than $2 a barrel, or more than 3%, on Friday as U.S. President Donald Trump’s threat of higher tariffs on China darkened the demand outlook in a market seen as oversupplied.

“The sell-off was driven by a shift toward risk-averse markets following Trump’s threat of tariffs on Chinese goods,” said Giovanni Staunovo, an analyst at UBS.

Brent crude futures settled at $62.73 a barrel, down $2.49, or 3.82%, the lowest level since May 7.

U.S. West Texas Intermediate crude ended at $58.90 a barrel, down $2.61, or 4.24%, the lowest level since early May.

“Today is the culmination of a variety of factors of which Trump’s threat of a massive increase in tariffs on China is just the latest,” said Andrew Lipow, president of Lipow Oil Associates.

OPEC production increases, additional production increases in North and South America and the loss of geopolitical risk after the Gaza ceasefire agreement “are factors that may add to Trump’s announcement this morning on tariffs on China,” Lipow said.

Trump, who was due to meet Chinese President Xi Jinping in about three weeks in South Korea, complained on social media about what he characterized as China’s plans to hold the global economy hostage after China dramatically expanded its export controls on rare earth elements on Thursday. China dominates the market for these elements, which are essential for technological manufacturing.

In addition to threatening to cancel the meeting with Xi, Trump said he could impose a massive increase in tariffs on Chinese goods.

Israel and the Palestinian militant group Hamas signed a ceasefire agreement on Thursday in the first phase of Trump’s effort to end the war in Gaza.

Under the deal, which Israel’s government ratified on Friday, fighting will cease, Israel will partially withdraw from Gaza and Hamas will release all remaining hostages it captured in the attack that precipitated the war, in exchange for hundreds of prisoners held by Israel.

Numerous ships have been attacked by the Iran-aligned Houthis in Yemen since 2023, targeting ships they consider linked to Israel in what they described as solidarity with the Palestinians over the war in Gaza.

The Gaza ceasefire agreement means attention can return to the looming oil surplus as OPEC continues to unwind production cuts, said ANZ analyst Daniel Hynes.

A smaller-than-expected increase in November output agreed on Sunday by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) eased some of those concerns about oversupply.