Oil prices have plummeted nearly 13% over the past two days, reaching their lowest levels in years, following President Donald Trump’s announcement of sweeping tariffs and a surprise increase in production by OPEC. Brent crude fell to around $66 a barrel and West Texas Intermediate (WTI) dropped below $61, raising significant concerns about the implications for global oil demand and economic growth.

The decline was triggered by Trump's tariffs, which include a baseline 10% duty on all imports, leading to fears of a trade war that could negatively impact economic activities worldwide. Responding to these tariffs, China announced retaliatory measures, further exacerbating global market instability. Reuters reported this escalation in trade tensions as a major factor stoking recession fears.

In addition to the tariffs, OPEC’s decision to raise oil output to 411,000 barrels per day from previously planned increases added to the bearish sentiment. Channel News Asia highlighted that this move could flood the market with more oil than necessary, further dampening prices.

“The trade war escalated, recession fears rise, and consequently oil demand growth is to take a sizeable hit,” commented Tamas Vargas, an analyst at PVM Oil Associates. Analysts are cutting forecasts for oil prices as Goldman Sachs lowered its projections for Brent crude to $66 a barrel, citing weakened demand and increased supply.

As oil prices fall, consumers may benefit from lower gasoline prices; however, this benefit could come at a significant cost to oil-producing regions, particularly Middle Eastern countries that rely heavily on higher oil prices to fund their economies. Saudi Arabia, for instance, requires oil prices above $90 per barrel to cover its government spending, complicating the strategic decisions within OPEC.

Experts predict that these developments could lead to significant shifts in the energy landscape, particularly affecting US shale producers who might struggle with profitability under these low price conditions. “You almost feel like this move from OPEC was the additional driver to push people towards saying ‘OK, now I really have to think about a sub-US$60 price,’” noted a UBS analyst in light of the ongoing market changes.

Analysts continue to monitor how these factors will unfold, as both oil prices and economic implications are likely to evolve in response to ongoing geopolitical and market pressures. For the latest developments, stay informed with updates from Forbes and India Times.