The oil market has confronted a “quadruple whammy”, Ole R. Hvalbye, Commodities Analyst at Skandinaviska Enskilda Banken AB (SEB), stated in a SEB report despatched to Rigzone by the SEB group on Monday.
U.S. tariffs, an OPEC+ manufacturing hike, a retaliation from China, and Saudi worth cuts made up this quadruple whammy, Hvalbye outlined within the report, which identified that Brent crude oil costs had “crashed by a whopping $13 per barrel (-21 %) since [the] final Wednesday excessive, marking a major decline in simply 4 buying and selling days”.
Within the report, Hvalbye identified that Brent was buying and selling at $62.8 per barrel. The SEB analyst highlighted that this was Brent’s lowest level since February 2021.
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“On Wednesday, the U.S. unveiled its new bundle of particular person tariffs,” Hvalbye stated within the report.
“The market reacted swiftly, as Trump adopted by means of on his promise to rebalance the U.S. commerce place with the world. His major goal is a extra balanced commerce surroundings, which, naturally, weakened Brent crude costs,” he added.
“The widespread imposition of strict tariffs is more likely to gasoline issues about an financial slowdown, which might weaken world oil demand. This macroeconomic uncertainty, particularly concerning tariffs, requires warning in regards to the tempo of demand development,” he continued.
Hvalbye famous within the report that, shortly after, OPEC+ introduced plans to lift manufacturing in Might by 411,000 barrels per day, “exceeding earlier expectations with a three-monthly increment”.
“OPEC emphasised that robust market fundamentals and a optimistic outlook had been behind the choice. Nevertheless, the choice doubtless stemmed from frustration inside the cartel, significantly after months of extra manufacturing from Kazakhstan and Iraq,” he added.
The SEB analyst additionally said within the report that, final Friday, despite the fact that the Chinese language market was closed, agency indications got here from China on the way it plans to deal with the U.S. tariffs.
“China is clearly assembly power with power, imposing 34 % tariffs on all U.S. items,” he stated.
“This transfer raises fears of an financial slowdown because of lowered world commerce, which might consequently weaken world oil demand going ahead,” he added.
Hvalbye went on to notice within the report that, firstly of this week, oil costs continued to drop after Saudi Arabia slashed its flagship crude worth by probably the most in over two years.
“Saudi Arabia lowered the Arab Mild OSP by $2.3 per barrel for Asia in Might, whereas costs to Europe and the U.S. had been additionally lower”, Hvalbye identified.
Within the SEB report, Hvalbye stated these 4 key elements have pushed the large worth drop during the last 4 buying and selling days and said that the overarching theme is the worry of weaker demand and stronger provide.
“The escalating commerce struggle has raised issues a couple of potential world recession, resulting in weaker demand, compounded by the surprisingly massive output hike from OPEC+,” he famous.
“That stated, it’s price questioning whether or not the market is underestimating the danger of a U.S.-Iran battle this yr,” he added.
“U.S. army mobilization and Iran’s resistance to diplomacy have raised the danger of battle,” he continued.
“With this backdrop, we proceed to forecast $70 per barrel for this yr. For reference, Brent crude averaged $75 per barrel in Q1-2025,” he added.
In a market evaluation despatched to Rigzone on Monday, Konstantinos Chrysikos, Head of Buyer Relationship Administration at Kudotrade, stated crude oil futures are dealing with additional draw back, “pushed by escalating commerce tensions between the US and China”.
“The imposition of upper tariffs by each international locations has raised issues a couple of potential world recession, which may dampen oil demand,” he said within the evaluation.
“This worry has triggered a pointy decline in costs … Merchants may proceed to cost in recessionary dangers, weighing available on the market,” he added.
“Moreover, the choice by OPEC+ to extend oil manufacturing additional pressures the market. The group has revised its output plans, now aiming so as to add 411,000 barrels per day in Might, considerably greater than the beforehand anticipated 135,000 barrels per day,” he continued.
“This improve in provide, reversing earlier manufacturing cuts, is anticipated to exacerbate the present glut out there,” he went on to state.
demand out there evaluation, Chrysikos stated Asia has seen a decline in oil imports within the first quarter of 2025, with a slight restoration in March.
“Nevertheless, demand may stay below stress given the present broader financial circumstances,” he warned.
“This mixture of weak demand and rising provide means that the outlook for crude costs may stay bearish for now,” he added.
In a separate market evaluation despatched to Rigzone in the present day, Chris Weston, Head of Analysis at Pepperstone, stated, “we noticed a strong breakdown in crude on the futures reopen, with front-month Brent and WTI crude taking out technical help ranges which have outlined the lows and marked key turning factors since mid-2021”.
“Whether or not the draw back break in worth of the important thing help ($62 in WTI crude) ranges holds is but to be seen, and after the clean-out of positioning by means of pressured liquidations in early Asia, we’re now seeing some courageous souls re-engaging with threat,” he added.
“Little or no has modified although by means of the buying and selling day, and Trump appears extremely relaxed in regards to the carnage out there, and the market’s capability to cost development and recession threat will stay challenged till the April financial information sequence – which begins to quantify the fallout of the brand new tariff charges – is thought later this month,” he continued.
“Till then, except we get tangible proof of much less fractured relations between the U.S. and China/Europe, the market will proceed to take down its notion of crude demand, whereas Saudi Aramco chopping oil costs to key clients, and OPEC+ calls to push for a bigger output hike, additionally weighs on the crude markets and compels merchants to promote rallies,” he went on to state.
Rigzone contacted the White Home, OPEC, and the State Council of the Individuals’s Republic of China for touch upon SEB’s report and Chrysikos and Weston’s evaluation. Rigzone additionally contacted Aramco for touch upon SEB’s report and Weston’s evaluation, the Iranian ministry of international affairs for touch upon SEB’s report, and the European Fee Chief Spokesperson for touch upon Weston’s evaluation.
A spokesperson for the European Fee declined to remark. On the time of writing, the White Home, OPEC, the State Council of the Individuals’s Republic of China, Aramco, and the Iranian ministry of international affairs haven’t responded to Rigzone.
To contact the writer, e-mail andreas.exarheas@rigzone.com
