Oil prices have continued their downward spiral, reflecting growing concerns over a potential recession as trade tensions between the United States and China escalate. On April 4, 2025, Brent oil futures for June on the London ICE Futures exchange plummeted by 6.50%, settling at $65.58 per barrel. Meanwhile, WTI oil futures for May on the New York Mercantile Exchange (NYMEX) fell even more sharply, down 7.41% to $61.99 per barrel. This marked a significant downturn, with Brent and WTI dropping 10.9% and 10.6% respectively over the past week.
By April 7, the decline persisted. As of 11:30 AM Moscow time, Brent futures had decreased further by 3.42%, reaching $63.34 per barrel, while WTI futures fell by 3.63% to $59.74 per barrel. The situation was compounded by a drop in natural gas prices, which fell to $3.7 per million BTU in the US. On April 4, natural gas futures for May had already decreased by 7.27% to $3.837 per million BTU, and by April 7, they fell an additional 2.16% to $3.754 per million BTU.
In Europe, gas prices also saw a decline, dipping below $405 per 1000 m3. May gas futures on the TTF hub in the Netherlands were trading at 34.7 euros/MWh ($404.05 per 1000 m3) as of April 7, a decrease of 4.67% compared to the previous day's estimated price.
The ongoing decline in oil prices can be traced back to rising trade tensions between the US and China, which have heightened fears of a recession that could diminish demand for oil. On April 4, oil prices fell nearly 7% after China announced increased tariffs on US goods, escalating the trade war and prompting investors to reassess the likelihood of an economic downturn.
G. Chilingirian from Onyx Capital Group commented on the situation, stating, "Uncertainty regarding tariff policy is very strong; several Wall Street banks are downgrading economic forecasts and indicating a significantly increased probability of recession, which is affecting sentiment." Last week, JPMorgan reported a 60% likelihood of a recession in both the US and globally.
In response to these market conditions, Saudi Arabia, the world’s largest oil exporter, announced on April 6 a substantial reduction in crude oil prices for Asian buyers. The country lowered its prices for May to the lowest levels seen in four months. T. Varga, an analyst at PVM, noted this move reflects a belief that the tariffs will reduce oil demand. He stated, "This shows that Saudi Arabia expects the balance of supply and demand to be disrupted, necessitating a reduction in official selling prices."
Despite the ongoing tariff disputes, imports of oil, gas, and petroleum products were exempted from the new tariffs imposed by former President Donald Trump. However, this policy could potentially trigger inflation, slow economic growth, and exacerbate trade disputes, all of which could further impact oil prices.
On April 4, Federal Reserve Chairman Jerome Powell remarked that the new tariffs were "more than expected," suggesting significant economic consequences were likely. In light of the economic slowdown, the OPEC+ group has decided to expedite its plans to increase oil production. The group now aims to return 411,000 barrels per day to the market in May, significantly higher than the previously planned 135,000 barrels per day.
Demand for oil appears to be weakening, as data from LSEG Oil Research indicates a decline in crude oil imports to Asia in the first quarter. Additionally, the market is closely monitoring statistics from Baker Hughes regarding drilling activity in the US, which revealed a decrease in the number of active drilling rigs. For the week ending April 4, the total number of operating oil and gas drilling rigs fell by two units to 590. Specifically, the number of operating oil rigs increased by five to 489, while gas rigs decreased by seven to 96.
The financial markets reacted to these developments with notable declines. The Dow Jones Industrial Average fell by 5.5% to 38,314.86 points, while the Standard & Poor's 500 dropped 6% to 5,074.08 points. The Nasdaq Composite also experienced a significant decline, falling 5.8% to 15,587.79 points. In terms of currency, the US Dollar Index, which measures the dollar's strength against six major currencies, decreased by 0.18% to 102.580 points on April 7. The euro gained 0.17% against the dollar, reaching $1.0974.
In the cryptocurrency market, Bitcoin also faced a downturn, dropping 8.21% to $76,181.00 per Bitcoin by April 7.
Furthermore, economists at Goldman Sachs have raised their concerns regarding the likelihood of a recession in the United States. According to a research note from the investment bank, the GDP growth forecast for the fourth quarter of 2025 has been revised down from 1% to 0.5%. The probability of a recession occurring within the next year has increased from 35% to 45%. This shift is attributed to a sharp tightening of financial conditions and ongoing political uncertainty, which may lead to a greater reduction in capital expenditures than previously anticipated.
Goldman's baseline forecast assumes an increase in the effective US tariff rate by a total of 15 percentage points, but achieving this would require a significant reduction in the tariffs that US authorities plan to implement on April 9, 2025.
