Oil prices prediction: Brent, U.S. crude crash to lowest since May. Experts predict what to expect

Oil prices fell more than $2 a barrel, or about 4 per cent, on Friday as U.S. President Donald Trump's threat to impose increased tariffs on China cast a shadow over the demand outlook in a market seen as over supplied. Brent crude futures settled at $62.73 a barrel, down $2.49, or 3.82 per cent, the lowest since May 5. U.S. West Texas Intermediate crude finished at $58.90 a barrel down $2.61, or 4.24 per cent, the lowest since early May.

It fell as a ceasefire between Israel and Hamas came into effect in Gaza. An end to the war could remove worries about disruptions to oil supplies, which had kept crude's price higher than it otherwise would have been. Losses accelerated following Trump's tariff threat, which could gum up global trade and lead the economy to burn less fuel.

Trump, who was due to meet Chinese President Xi Jinping in about three weeks in South Korea, complained on social media about what he characterized as China's plans to hold the global economy hostage, after China dramatically expanded its export controls on rare earth elements on Thursday. China dominates the market for such elements, which are essential to tech manufacturing.


Trump took to his social media platform and said he's considering “a massive increase of tariffs” on Chinese imports. He's upset at restrictions China has placed on exports of its rare earths, which are materials that are critical for the manufacturing of everything from consumer electronics to jet engines.

"Today is the culmination of a variety of factors of which Trump's threat of a massive increase in tariffs on China is just the latest," said Andrew Lipow, president of Lipow Oil Associates.

Production increases from OPEC, additional output gains in North and South America, and the loss of geopolitical risk after the Gaza ceasefire agreement "are all factors that can be layered on top of Trump's announcement this morning of tariffs on China," Lipow said.

Oil Prices Prediction

The Gaza ceasefire deal means the focus can move back to the impending oil surplus, as OPEC proceeds with the unwinding of production cuts, said Daniel Hynes, an analyst at ANZ.

A smaller-than-expected November hike in output agreed by the Organization of the Petroleum Exporting Countries and allies (OPEC+) on Sunday eased some of those oversupply concerns.

"Markets' expectations for a sharp ramp-up in crude supply have not manifested themselves in substantially lower prices," BMI analysts said in a note on Friday.

Investors are also worried that a prolonged U.S. government shutdown could dampen the American economy and hurt oil demand in the world's largest crude consumer.

FAQs

Q1. What are two benchmarks in International Oil sector?
A1. Brent crude, U.S. West Texas Intermediate crude are two benchmarks in International Oil sector.

Q2. What are current oil prices?
A2. Brent crude futures settled at $62.73 a barrel, down $2.49, or 3.82 per cent, the lowest since May 5. U.S. West Texas Intermediate crude finished at $58.90 a barrel down $2.61, or 4.24 per cent, the lowest since early May.