Causes of the Decline in Oil Prices
Recent developments in the oil market have led to a significant drop in oil prices, which have fallen to their lowest level since early 2021. This situation is primarily a result of the tariff package introduced by the US government, which is burdening global economic activity and thereby affecting the demand for crude oil.
US Tariff Package
The introduction of comprehensive tariffs on US imports has caused considerable uncertainty in the markets. These measures particularly affect oil-intensive Asia and could hinder economic growth in China, which in turn would reduce global oil demand.
OPEC+ Production Decisions
The OPEC+ has increased its oil production, further putting pressure on oil prices. This decision was made in response to non-compliant production agreements from some member countries and could lead to an oversupply in the global oil market.
Recession Risks
The US tariff policy has increased recession risks, which further weighs on global economic activity and demand for crude oil.
Forecasts and Outlook
Goldman Sachs has significantly lowered its oil price forecasts for 2025 and 2026. An average price of 69 USD for Brent and 66 USD for WTI is expected for 2025. For 2026, the forecasts are 58 USD for Brent and 55 USD for WTI. Citi and Morgan Stanley have also reduced their short-term forecasts due to ongoing recession fears and tariffs.
Possible Consequences
Energy Prices
The decline in oil prices could lead to lower energy costs for consumers, which could have a positive impact on inflation.
Inflation
A lower oil price can dampen inflation, as energy costs are a significant factor in price formation. Central banks may have more room for maneuver in monetary policy.
Global Economic Impacts
The decline in oil prices could be a leading indicator for a global slowdown in growth. Uncertainties in the oil market and geopolitical tensions contribute to persistent volatility.
Investors and Markets
The uncertainty in the oil market and falling prices could unsettle investors and lead to a reevaluation of investments in the energy sector. Trading in CFDs could be a way to profit from the volatility.