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Informist, Wednesday, Apr. 9, 2025

By Sandeep Sinha

MUMBAI – Crude oil prices in domestic and global markets extended their fall for the fifth consecutive day due to the escalation in trade war between China and the US. The ongoing tiff between the two biggest economies has led to fears of a global economic slowdown and weak oil demand, pulling down oil prices to their lowest levels since 2021.

The sentiment was further aggravated by the decision of the Organization of the Petroleum Exporting Countries and allies to increase production by 411,000 barrels per day from May. The decision will likely push the global crude oil market into surplus and limit any further upside in prices.

"The main motive behind this bold decision was to punish overproducing OPEC and allies," Shweta Shah, energy analyst at Motilal Financial Services. "They also see a far lower demand in the September and December quarters which is why they are trying to gain market share as much as possible in the near-term," she said.

"The way the retaliation is happening between the US and China has never happened in history. The US is the biggest consumer and producer of crude oil. China is the second largest consumer. This is going to have an impact on crude oil prices," Vandana Bharti, associate vice president and head of commodity research at SMC Global, said. Many global investment banks have projected that the world is moving towards a recession, which will push down oil demand, she said.

US President Donald Trump's tariffs on goods imported into the country came into effect earlier Wednesday. Trump has also hiked import duty on goods from China to 104% in retaliation to Beijing imposing a 34% duty on US goods. China has since raised tariffs on US goods to 84%, setting the scene for further escalation in tension.  

China's State Council Information Office on Wednesday released a white paper on US-China economic and trade relations criticising the rise of unilateralism and protectionism in the US. It said that China has to take forceful countermeasures to defend its national interests, but emphasised on resolving disputes through dialogue and consultation.

Crude oil prices of West Texas Intermediate, Brent and on the Multi Commodity Exchange of India have tumbled over 30% from their 52-week highs. Oil prices are officially trading in the bear market as the risk of a full-blown global trade war has risen as other nations may take measures against the US tariffs.  

MCX crude prices have key support at INR 4,700-4,750 per barrel and around $55 a barrel for WTI on NYMEX, Bharti said. As the prices have seen a sharp decline towards INR 5,000 per barrel from INR 6,100 levels, they may see a slight bounce towards INR 5,200 on the domestic exchange. 

Shah said that investors should maintain a sell-on-rise strategy as MCX crude prices can fall towards INR 4,700 per barrel and WTI to $55.

At 1640 IST, June crude oil contract of Brent crude oil was at $59.18 per barrel, down 5.8%, while the April contract of West Texas Intermediate was at $56.04 a barrel, down 5.9%. The most-active March crude oil contract on MCX was at INR 4,886 per barrel, down 6%. End

US$1 = INR 86.68

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Saji George Titus

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