- Oil prices decline as OPEC+ moves forward with an April output increase, surprising markets, while U.S. tariffs on Canada, Mexico, and China add further pressure.
- Market concerns grow over potential U.S. sanctions relief for Russia after Trump pauses military aid to Ukraine, raising fears of increased oil supply.
Oil prices extended losses on Tuesday, March 4, 2025, after reports that the organisation of petroleum exporting countries and their allies (OPEC+) will proceed with an output increase in April, adding to market concerns. Further pressure came from the introduction of U.S. tariffs on Canada, Mexico, and China, with Beijing retaliating in response.
By 1417 GMT, Brent crude futures had dropped $1.04, or 1.45%, to $70.58 per barrel, while U.S. West Texas Intermediate (WTI) crude fell 73 cents, or 1.07%, to $67.64. Brent was trading near a five-month low.
On Monday, March 3, OPEC and its allies, known as OPEC+, announced they would proceed with a planned oil production increase of 138,000 barrels per day in April—the first output hike since 2022. The decision caught markets off guard, with analysts interpreting it as a shift in strategy.
“The change in OPEC strategy looks like they are prioritizing politics over price,” said Bjarne Schieldrop, chief commodities analyst at SEB, suggesting the decision could be linked to former U.S. President Donald Trump’s calls for lower oil prices.
Meanwhile, the U.S. imposed 25% tariffs on imports from Canada and Mexico, with an additional 10% tariff on Canadian energy. Tariffs on Chinese goods were also raised from 10% to 20%, sparking fears of an escalating trade war. In response, China swiftly announced 10-15% tariff increases on American agricultural products and placed 25 U.S. companies under export and investment restrictions.
Analysts warn that these trade tensions could slow global economic activity, reduce energy demand, and further depress oil prices.
Another factor affecting oil prices was Trump’s decision to halt U.S. military aid to Ukraine following a recent Oval Office confrontation with President Volodymyr Zelenskiy. Some market analysts believe this move signals a potential thaw in U.S.-Russia relations and raises speculation about possible sanctions relief for Russian oil, which could lead to increased global supply.
Reports also suggest that the White House has directed officials to draft a list of sanctions that could be eased for future negotiations with Moscow.
“The perfect storm for crude oil has intensified,” said IG market analyst Tony Sycamore. “The combination of OPEC+ output increases, U.S. tariffs triggering a trade war, and the potential easing of Russian oil sanctions is putting significant downward pressure on prices.”
Despite these concerns, Goldman Sachs analysts said that Russia’s oil flows are already limited by its OPEC+ production targets, meaning any sanctions relief might not significantly impact supply. Additionally, weaker Chinese demand due to refinery maintenance is expected to keep oil markets under pressure in the coming weeks.