Oil prices have fallen to their lowest levels in more than three years amid fears that Donald Trump’s trade war is already starting to slow down the world economy.
Brent crude fell as low as $68.33 a barrel during trading on Wednesday, a level last seen in late 2021. The latest drop means oil prices have now fallen by more than 5pc since Monday amid concerns about the impact of Mr Trump’s trade war on the global economy and fears of oversupply.
Figures released by the US Energy Information Administration showed stockpiles of oil were rising amid stagnating demand. Stores of oil in the US rose by 3.6m barrels last week to 433.8m, higher than analysts had predicted.
Meanwhile, data from ADP showed the US economy added 77,000 jobs in February, far lower than the 140,000 that had been expected.
Nela Richardson, chief economist at ADP, said: “Policy uncertainty and a slowdown in consumer spending might have led to lay-offs or a slowdown in hiring last month.”
Bosses in the world’s largest economy are now hesitant to hire as they “assess the economic climate ahead”, she added.
The figures were released hours after President Trump admitted there would be “a little disturbance” as a result of his sweeping tariffs on Canada, Mexico and China. Economists have warned the trade war will fuel inflation and slow growth.
However, the President insisted his trade policies would ultimately benefit the US. He told Congress: “Tariffs are about making America rich again and making America great again, and it is happening and it will happen rather quickly.”
Oil prices have also been pushed lower by concerns about overproduction. Opec+ agreed at the start of the week to boost output. The cartel, led by Saudi Arabia and Russia, said it would produce an extra 2.2m barrels a day by 2026.
Chris Beauchamp, chief market analyst at IG, said: “Weak demand should have caused the cartel to stay its hand, but geopolitics have come into play, with the move motivated largely by a need to appease the combative US president.”
Donald Trump used a speech to the World Economic Forum in January to urge Saudi Arabia and other members to “bring down the cost of oil”.
Mr Trump is meanwhile attempting to boost production at home, promising to “drill, baby, drill”, while rolling back environmental protections and withdrawing the US from the Paris Agreement on climate change.
British oil giants BP and Shell have also signalled that they are jettisoning much of their focus on green energy and investing more in oil and gas production.
Rebecca Babin, an energy trader at CIBC, told Bloomberg: “At this point, the focus has completely shifted from supply risks to demand concerns, which could signal we’re approaching a bottom.”
Lower crude prices will raise hopes of cheaper petrol and diesel prices at the pumps. UK petrol prices hit a six-month high in February, according to the RAC. It found that the average cost of a litre of unleaded rose by 65p to reach 139.65p.
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