Crude oil is an essential energy source and a vital raw material for various industries, such as manufacturing, agriculture, and logistics. A sudden drop in crude oil prices can be a warning sign; however, it should only be considered a serious red flag if the decline is sustained over time, as this may indicate weakening global demand and a potential economic slowdown.
Crude Oil Prices have declined by over 15 percent since the announcement of Tariffs by Trump on countries all over the world, even though oil is exempted from the tariff. Several reasons arise for the severe fall in crude prices following the tariff announcement.
Price Movement of Crude Oil
The Commodity has been trading in a range of $20 since the start of 2023. For the first time in two years, it has fallen below $70 in 2 years on a closing basis, falling to a low of $62.55.
Further, the Chart of Brent Crude is also showing a breakdown of descending triangle, which has been in formation for 2 years now. The breakdown occurred when Brent Crude broke down the Major Support of $69 on a closing basis.
Major Reasons for Fall in Prices
The Primary reason can be attributed to China’s reaction to the U.S’s tariffs, which could escalate to a trade war between the world’s two biggest economies, further leading to an economic slowdown and recession. As the Crude oil is directly linked to economic growth, the recession fears took a toll on the prices of the commodity. OPEC+ also said that eight key OPEC+ producers agreed on raising combined crude oil output and speeding up their pace of scheduled price hikes.
US Federal Reserve Chairman Jerome Powell also mentioned that the effect of US tariffs could be bigger than expected earlier, and warned of high inflation and a decrease in the growth rate.
Written By Abhishek Das
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