Crude oil futures plummeted last week, nearing multi-year lows as market concerns over US tariffs and an unexpected production boost from OPEC+ weighed heavily on commodities. The US oil benchmark, crude futures, dropped last Wednesday by as much as 4%, settling at $65.22, marking its lowest price since late 2021. This decline also impacted major US oil companies, with stocks of ConocoPhillips and ExxonMobil falling in response.

The oil market has been volatile following President Donald Trump’s recent imposition of a 25% tariff on Canadian and Mexican imports, along with an increase in tariffs on Chinese goods to 20%. While similar tariff threats earlier in the year drove oil prices higher due to concerns about constrained supply, this time, traders fear the broader economic impact of escalating trade tensions. The new levies, with possible retaliatory measures, could further dampen global economic growth.

In the US, market participants anticipate that these tariffs will contribute to slightly higher inflation and slower economic expansion. However, the consequences are expected to be more severe for Canada and Mexico, potentially pushing both economies into economic downturn.

Adding to downward pressure on oil prices was OPEC+’s decision to ramp up production starting in April 2025. This move partially reverses the output cuts the group implemented in November 2023, further weighing on the market.

Trump’s energy policies have focused on reducing fuel costs, advocating for increased domestic oil production as a strategy to combat inflation. Since his inauguration, crude prices have
steadily declined, with West Texas Intermediate (WTI) falling approximately 15%. Although fuel prices have seen a modest drop over the past month, the latest market developments raise questions about the long-term impact of these economic and geopolitical shifts.

Crude oil futures plummeted

Bottom line:

Oil prices are likely to remain volatile over the near term as purchasers grapple with the risk of constrained demand and disrupted supply chain dynamics induced by tariffs. Volatility is likely to remain elevated in markets as well, and although risks are elevated, so too are the prospects for disciplined investors seeking out opportunities to invest in mispriced assets.

Macroeconomics in Brief