LONDON, March 4 (Reuters) – Oil prices continued to decline on Tuesday following reports that OPEC+ plans to move forward with an output increase in April. Additional pressure came from U.S. tariffs on Canada, Mexico, and China, along with retaliatory tariffs from Beijing. Brent futures dropped $1.04, or 1.45%, to $70.58 a barrel by 1417 GMT, while U.S. West Texas Intermediate (WTI) crude fell 73 cents, or 1.07%, to $67.64. Brent was trading near a five-month low. Darren Lim, commodities strategist at Phillip Nova, noted that the downward trend in oil prices is primarily due to OPEC+’s decision to increase output and the introduction of U.S. tariffs. Another factor was President Donald Trump’s decision to pause all U.S. military aid to Ukraine after a disagreement with President Volodymyr Zelenskiy. OPEC+ decided on Monday to proceed with a planned April oil output increase of 138,000 barrels per day, the group’s first since 2022. Bjarne Schieldrop, chief commodities analyst at SEB, remarked that the change in OPEC strategy suggests prioritizing politics over price, likely influenced by Trump’s calls for lower oil prices. U.S. tariffs of 25% on imports from Canada and Mexico took effect on Tuesday, with 10% tariffs on Canadian energy, while tariffs on Chinese goods increased to 20% from 10%. Analysts predict these tariffs will curb economic activity and energy demand, affecting oil prices. China quickly retaliated, announcing increased import levies on American agricultural and food products and placing 25 U.S. companies under export and investment restrictions. Further pressure on oil prices came from Trump halting military aid to Ukraine, raising concerns about potential U.S. sanctions relief for Russia and more oil supply entering the market. Tony Sycamore, IG market analyst, stated that the combination of U.S. tariffs and the pause in aid to Ukraine intensifies fears of a trade war and impacts crude oil negatively. However, Goldman Sachs analysts noted that Russia’s oil flows are more constrained by OPEC+ production targets than sanctions, suggesting an easing might not significantly boost supply. The bank also highlighted downside risks to oil price forecasts due to higher crude supply and reduced demand from softer U.S. activity and tariff escalation. Chinese demand is also down, with refinery maintenance underway, according to Josh Callaghan, head of crude derivatives at Arrow Energy Markets. — news from Reuters
