Crude oil futures plunged in midmorning trading in Asia on April 3 as global markets weighed the impact of US President Donald Trump’s tariff barrage on trading partners, fueling concerns over weakening global demand.

At 11:44 am Singapore time (0344 GMT), the ICE June Brent futures contract fell $1.63/b (2.17%) day over day to $73.32/b, while the NYMEX May light sweet crude contract was down $1.62/b (2.26%) from the previous close at $70.09/b.

In the overnight US trading session on April 2, Washington announced blanket tariffs of at least 10% on all imported goods, along with a sliding scale of reciprocal duties on major trading partners.

While the tariffs exclude most energy imports, including those from key trading partners Mexico and Canada, they are expected to slow global economic growth.

“We see this level of tariffs and a looming trade war as bearish for the global economy and oil demand and thus bearish for Platts Dated Brent,” S&P Global Commodity Insights analysts said.

“In a pessimistic scenario, where trade wars escalate and are compounded by other adverse factors such as geopolitical conflicts and inflation, S&P Global Market Intelligence estimated that global GDP [gross domestic product] growth would be downgraded by roughly 1%, leading to a reduction in oil/liquids demand growth by half a million b/d in 2025 and year-over-year oil/liquids demand growth of less than 750,000 b/d for 2025,” they added.

At a White House event, Trump unveiled a chart announcing that the US would impose a 34% reciprocal tariff on imports from China, in addition to existing duties on specific Chinese goods like automobiles and a 20% tariff previously imposed during his administration. The US also announced a 20% tariff on products from the EU and other major trading partners.

“The macro drag is real. With this announcement, growth desks will be busy slashing US real GDP forecasts again. Many had already trimmed 2025 growth to around 1.7%, and that now looks optimistic. Inflation? It is about to get another leg higher — think electronics from Asia, pharma and industrial inputs — a perfect storm for the Fed,” SPI Asset Management Managing Partner Stephen Innes said.

With Washington’s slew of tariffs, investors worldwide are bracing for retaliatory measures from key trading partners, heightening concerns of a global trade conflict and deepening fears of an economic slowdown.

“The US has torched what remained of multilateralism and opened the door to retaliation from multiple fronts. Keep an eye on policy responses from Brussels, Beijing and Tokyo, but also watch for the Fed’s next move — the pivot clock is ticking,” Innes said.

With the Federal Reserve tasked with keeping inflation low and fostering economic growth, Trump’s protectionist policies pose a challenge to the US central bank, with markets already pricing in a potential rate cut.

“Speaking of the Fed — it is officially stuck in no-man’s-land. Growth is slowing, inflation is spiking and the street is already pricing a rate cut pivot by early fall,” Innes added.

“In other words, a lower oil price and rising US production can’t be achieved at the same time; hence our view that Brent toward $65 and WTI toward $60 offer good value,” SAXO Bank Head of Commodity Strategy Ole Hansen said.

Meanwhile, in the Middle East, several OPEC+ ministers are set to meet later April 3 ahead of the April 5 meeting of the Joint Ministerial Monitoring Committee to reinforce compliance with supply agreements as the oil producers group begins tapering its production cuts.

“In the coming months, we see no major change in OPEC’s overall output, but instead a rotation of market shares,” Hansen said.

Further weighing on oil market fundamentals, US crude inventories jumped 6.2 million barrels in the week ended March 28, as exports and refinery runs declined, data from the Energy Information Administration showed April 2.

Crude stocks totaled 439.8 million barrels, up 28.1 million barrels since mid-January, primarily driven by lower demand during the refinery maintenance season.

Dubai swaps

The June Dubai swap was pegged at $72.74/b at 10:00 am Singapore time (0200 GMT) on April 3, down $1.20/b (1.62%) from the April 2 Asian market close.

The May-June Dubai swap intermonth spread was pegged at $1.03/b, widening 2 cents/b day over day, while the June-July Dubai swap intermonth spread was pegged at 89 cents/b, remaining unchanged over the same period.

The May Brent-Dubai exchange of futures for swaps was pegged at 38 cents/b, up 8 cents/b from the previous Asian close.

by Alvinn Philips
Credits: spglobal.com