Trump Tariff War: Oil Prices May Even Touch $40 Per Barrel In Worst Scenario, Warn Experts
Experts to NDTV Profit say that in an extreme scenario, oil prices could trade between $40 and $50 per barrel.
Brent crude prices have nosedived 18% in just the past one week and are trading around $61.26 per barrel right now. This plunge has been mainly driven by US President Donald Trump's tariffs and concerns of a global slowdown.
To put it into perspective, oil prices stood around $72 at the start of last week and around $75 at the start of 2025.
And in a scenario where a trade war flares up, global oil supply increases amid a slowdown or recession, these oil prices could fall below $50, or even $40 per barrel, warn experts.
Why Are Oil Prices Falling?
OPEC+ has made the decision to go ahead with its plan to phase out its oil output cuts in a market which has low demand concerns.
President Trump's recent worldwide reciprocal tariffs have intensified fears of a global trade war.
The announced tariffs have also increased worries about a global slowdown and US recession which can impact oil demand.
The Base Case
As per Goldman Sachs, brent crude prices could decline to $62 per barrel by December 2025 and $55 per barrel by December 2026. However, it is to be noted that this forecast has two main assumptions:
The US economy avoids a recession due to a large reduction in tariffs
OPEC+ supply rises moderately with two final increases of 130-140 thousand barrels per day each in June and July.
If one has to look at what can be expected from oil prices in the short term, Vandara Hari, Founder & CEO of Vanda Insights, has a more bullish forecast of brent crude prices averaging in the $65-70 range in the current quarter.
Peter McGuire, CEO at XM Australia, believes there is strong possibility of brent prices being sub $55 over the Q2 CY25 timeframe. McGuire states that "there are too many geopolitical issues playing out simultaneously that could severely impact the global economy".
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The Extreme Scenario
In a less likely scenario with both a global GDP slowdown and a full unwinding of OPEC+ supply cuts, Goldman Sachs notes that brent oil prices could fall to just under $40/barrel in late 2026.
Peter McGuire also mirrors a similar view. When asked under what circumstance could oil prices touch $40 to $50 per barrel in 2025 itself, McGuire answered by noting, "Economic warfare and how China reacts to the US, demand destruction and ongoing geopolitical instability across the globe."
Vandana Hari told NDTV Profit that a full-blown global trade war dragging major economies into recession could push brent below $50. An economic downturn accompanied by an OPEC+ supply implosion could have the same effect. However, neither of these scenarios is her base case.
