By Colleen Howe and Emily Chow
BEIJING/SINGAPORE (Reuters) – Oil prices extended losses on Tuesday following reports that OPEC+ will proceed with a planned output increase in April and as markets braced for the start of U.S. tariffs on Canada, Mexico and China, as well as Beijing’s retaliatory tariffs.
Brent futures were down 90 cents, or 1.26%, to $70.72 a barrel at 0827 GMT while U.S. West Texas Intermediate (WTI) crude was off 79 cents, or 1.16%, to $67.58.
“The current downward trend in oil prices is primarily driven by OPEC+’s decision to increase output and the introduction of U.S. tariffs,” said Darren Lim, commodities strategist at Phillip Nova.
He said another factor was President Donald Trump’s decision to pause all U.S. military aid to Ukraine following his Oval Office clash with President Volodymyr Zelenskiy last week.
The Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia, known as OPEC+, also decided on Monday to proceed with a planned April oil output increase of 138,000 barrels per day, the group’s first since 2022.
“While this decision aims to gradually unwind previous output cuts, it has raised concerns about potential oversupply in the market,” Lim said.
U.S. tariffs of 25% on imports from Canada and Mexico took effect at 12:01 a.m. EST (0501 GMT) on Tuesday, with 10% tariffs on Canadian energy, while tariffs on imports of Chinese goods were increased to 20% from 10%.
Analysts expect the tariffs to weigh on economic activity and fuel demand, putting downward pressure on oil prices.
“Market participants are struggling to gauge the impact of the flood of energy-related policy announcements made by the Trump administration this month,” BMI analysts wrote in a note.
“However, those weighing to the downside, notably U.S. tariff measures, are currently winning out.”
As the U.S. tariffs kicked in on Tuesday, China swiftly retaliated, announcing 10% to 15% hikes to import levies covering a range of American agricultural and food products, and placing 25 U.S. firms under export and investment restrictions.
Further weighing on oil was Trump’s halt of military aid to Ukraine, as the market has viewed the growing distance between the White House and Ukraine as a sign of a potential easing of the conflict.
That in turn could lead to sanctions relief for Russia, with more oil supply returning to the market.
The pause followed a Reuters report that the White House has asked the State and Treasury departments to draft a list of sanctions that could be eased for U.S. officials to discuss during talks with Moscow, sources have said.
“The perfect storm for crude oil has intensified. Reports that the U.S. has paused military aid to Ukraine is viewed as a precursor to lifting sanctions on Russian oil,” said IG market analyst Tony Sycamore.
“It also comes at the same time as U.S. tariffs on Canada, Mexico and China come into effect, sparking fears of a trade war. Crude oil just cannot take a break at the moment.”
However, Goldman Sachs analysts said in a note on Monday that Russia’s oil flows are constrained more by its OPEC+ production target than sanctions, warning that an easing might not boost them significantly.
The bank also said higher-than-expected crude supply and a demand hit due to softer U.S. activity and tariff escalation posed downside risks to oil price forecasts.
(Reporting by Colleen Howe in Beijing and Emily Chow in Singapore; editing by Jamie Freed and Clarence Fernandez)
