Oil prices dip to 3-year low sparking fresh concerns of global recession
Oil prices plummeted by 7% on Friday evening, reaching their lowest levels in over three years, as escalating trade tensions between China and the United States sparked fresh concerns of a global recession.
The sharp drop followed China’s announcement of a 34% tariff hike on all U.S. goods, effective June 10, intensifying what many view as the most aggressive trade war in a century.
The global fallout from U.S. President Donald Trump’s latest tariff escalation is mounting, with countries worldwide preparing countermeasures.
Reflecting growing economic pessimism, investment bank J.P. Morgan has raised its probability forecast for a global recession by year-end from 40% to 60%.
In energy markets, Brent crude futures sank $4.56 (6.5%) to settle at $65.58 per barrel, while U.S. West Texas Intermediate (WTI) crude tumbled $4.96 (7.4%) to close at $61.99. Intra-day lows saw Brent touch $64.03 and WTI fall to $60.45 — the lowest since 2021. Brent posted its steepest weekly drop in 18 months, and WTI recorded its largest weekly loss in two years.
Scott Shelton, an energy analyst at United ICAP, commented, “This may be close to fair value for crude until we better understand the scale of demand destruction.” He warned of further declines, predicting WTI could violently fall to the $55–$60 range in the short term.
Meanwhile, internal tensions within the OPEC+ alliance further destabilized the market. According to three sources cited by Reuters, dissatisfaction with output violations by Kazakhstan and Iraq prompted the alliance to sharply raise production in May by 411,000 barrels per day — triple the market’s expectations and roughly 0.4% of global supply.
Despite Saudi Arabia’s traditional support for market-balancing production cuts, it had grown increasingly frustrated with Kazakhstan’s record-breaking output — bolstered by Chevron and ExxonMobil — and Iraq’s slow pace of compliance. The Kingdom warned that continued non-compliance would lead to unilateral production increases.
One source indicated the alliance is unlikely to reverse course, even if oil prices dip below $60 per barrel. Another pointed to a recent letter from Saudi Energy Minister Prince Abdulaziz bin Salman, urging stricter adherence to quotas and warning of further production hikes if violations persist.
While the decision to raise output drew comparisons to past “price wars” — including Saudi Arabia’s 2020 clash with Russia and OPEC’s battle with U.S. shale in 2014–15 — the sources insisted the latest move is not intended as such. However, they acknowledged that if prices continue to slide, producing nations will be forced to reconsider their strategies to avoid mutual harm.
