Oil prices took a dramatic hit on Thursday, tumbling over 7% as panic selling gripped financial markets. The sharp decline followed former President Donald Trump’s announcement of sweeping new tariffs and an unexpected supply increase from OPEC+, both of which fueled uncertainty about global demand and market stability.
By mid-morning, West Texas Intermediate (WTI) crude oil (CL=F), the U.S. benchmark, had fallen 7.5% to around $66.10 per barrel, while Brent crude (BZ=F), the global benchmark, dropped below $70 per barrel. This marked one of the largest single-day declines in recent months and signaled a potential shift in market sentiment.
The steep decline was largely driven by fear and uncertainty rather than immediate changes in supply and demand fundamentals, according to market analysts.
“The panic selling that’s occurring is very likely an over-exaggeration of the true fundamentals,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities. “Near term, however, there’s a lot of unknowns, so you’re seeing a lot of funds unwind positions.”
Investors had been bullish on oil prices in recent weeks, expecting geopolitical tensions and supply constraints to keep the market tight. However, the combination of Trump’s aggressive trade policies and OPEC+’s decision to boost production has introduced fresh concerns about oversupply and weaker global demand.
Adding to the selloff, the Organization of Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, announced they would increase oil production by 411,000 barrels per day starting in May.
While markets had anticipated some additional supply, the move was larger than expected, deepening losses in crude prices.
With global supply now expected to rise and demand potentially slowing due to economic uncertainty, traders are recalibrating their outlooks for oil prices heading into the second half of 2025.
Trump’s new tariff policies have raised concerns about the broader impact on economic growth. While energy imports were not specifically targeted in the latest round of tariffs, the indirect effects could be significant.
China, the world’s largest crude importer, now faces a 54% tariff on U.S. goods. If the Chinese economy slows as a result, its demand for oil could weaken, further pressuring global crude markets.
Before Thursday’s selloff, oil prices had been rising due to Trump’s pressure on Iran, Venezuela, and Russia to curb their oil exports. This rally had already driven U.S. gas prices to their highest levels since September, with the national average nearing $3.25 per gallon.
With oil prices now plunging, the outlook remains uncertain. If crude prices continue to fall, gas prices could stabilize or even decline. However, if global trade tensions persist and economic growth slows, oil demand could remain under pressure in the months ahead.
For now, investors are bracing for more volatility as geopolitical risks and market uncertainty take center stage.