Investing.com-- Oil prices fell sharply to an over four-year low in Asian trade on Wednesday as signs of a rapidly escalating U.S.-China trade war sparked heightened concerns over a recession and weaker demand.
Oil resumed its downward spiral after seeing some respite in the prior session, as traders hoped that U.S. President Donald Trump would offer some concessions in his tariff agenda to allow for negotiation, especially with China.
But Trump on Tuesday evening signed an executive order hiking his planned tariffs on China by 50%, marking a dire escalation in tensions with the world’s biggest oil importer.
Brent oil futures expiring in June fell 3.8% to $60.46 a barrel, while West Texas Intermediate crude futures fell 4.1% to $56.69 a barrel by 20:53 ET (00:53 GMT).
Oil took little support from industry data showing a small draw in U.S. crude inventories.
Trump hikes China tariffs to 104%, retaliation awaited
Trump’s latest order brings U.S. tariffs on China to a cumulative 104%, much higher than the 60% worst case rate threatened by Trump when he was campaigning for President.
The tariffs are expected to dent China’s economy, potentially hurting the country’s appetite for oil imports. China is also expected to escalate its retaliation against the U.S., after imposing 34% tariffs on U.S. goods last week.
Beijing has maintained a largely harsh rhetoric against Trump’s tariffs, vowing to “fight till the end.” China is also expected to ramp up its stimulus efforts to offset the impact of Trump’s tariffs.
But beyond China, oil markets were also on edge over the broader economic impact of Trump’s tariffs, which stand to disrupt global trade and potentially dent growth. Trump’s tariffs will be borne largely by U.S. importers, a trend that could drive up local inflation and also undermine growth.
Several investment banks, brokerages, and betting markets were seen increasing their odds for a U.S. recession in 2025. Such a scenario bodes poorly for oil demand.
US inventories see small draw- API
Data from the American Petroleum Institute showed a nearly 1.1 million barrel draw in U.S. inventories over the past week. The draw comes after several weeks of outsized builds in inventories- a trend that had sparked some concerns over sluggish fuel demand.
The API data usually heralds a similar reading from official inventory data , which is due later on Wednesday.
Oil inventories grew by a substantially bigger-than-expected 6.1 million barrels in the prior week.