Oil prices fell sharply on Monday, extending a steep decline from last week, as mounting trade tensions between the United States and China continued to rattle markets and fuel fears of a global recession.
By 3:10 pm AEST (5:10 am GMT) Brent crude futures dropped $1.68, or 2.6%, to $63.90 per barrel, while U.S. West Texas Intermediate (WTI) fell $1.52, or 2.5%, to $60.13 per barrel.
Both benchmarks were down more than 3% at their session lows, marking their weakest levels since April 2021.
The decline followed a dramatic 7% plunge on Friday, after China escalated the trade dispute by announcing retaliatory tariffs on U.S. goods.
While U.S. tariffs announced by President Donald Trump excluded imports of oil, gas, and refined products, traders remain concerned that the broader trade conflict could fuel inflation, slow global growth, and weigh on energy demand.
China confirmed on Friday that it would impose additional 34% tariffs on U.S. goods, heightening investor fears of a prolonged economic conflict.
Federal Reserve Chair Jerome Powell warned that the tariffs are “larger than expected”, and said the economic impact, including inflation and slower growth, is also likely to be greater than initially forecast.
Pressure on oil prices was also exacerbated by the Organisation of the Petroleum Exporting Countries and its allies (OPEC+), which accelerated plans to raise output. The group now intends to bring an additional 411,000 barrels per day (bpd) to the market in May, up significantly from the previously scheduled 135,000 bpd.
“The move appears to be driven by the desire to punish members who have been overproducing against their agreed quotas,” noted analysts at ANZ. “Kazakhstan has been a particular source of friction after it significantly exceeded its output ceiling. Iraq and Russia have also been culprits.”
Geopolitical tensions added further uncertainty to the outlook. Iran on Sunday rejected U.S. demands for direct nuclear talks, warning regional nations of potential strikes if indirect negotiations are not accepted.
