A pump jack operates near a gas turbine power plant in the Permian Basin oil field outside of Odessa, Texas, U.S. February 18, 2025.
U.S. oil prices have dropped to their lowest level since 2021 this week, sparked in part by concerns that the massive tariffs announced by the United States will hurt economic growth.
Futures for U.S. West Texas intermediate crude fell more than 7% on Friday, bringing the price per barrel to $62.04. At one point, it fell below the $62 level. The latest slide comes after a 6.6% decline on Thursday.
The swift drop for oil prices comes as the supply-demand dynamic for the energy market is getting hit on both sides.
The tariffs announced by U.S. President Donald Trump this week have raised the chances of a global recession, according to Wall Street economists.
The economic outlook is a key factor for oil prices, as both consumers putting gas in their cars or chemical producers using energy as a feedstock in their production increase the demand for crude.
“While it is currently difficult to predict the overall direction of developments, we believe that, for oil prices, the trajectory is unmistakably one-way,” said Natasha Kaneva, head of global commodities research at JPMorgan, in a note to clients Friday.
Just as the economic outlook has weakened, projections for global oil supply have jumped.
On Thursday, eight members of OPEC+ agreed to raise their combined daily output of crude oil by 411,000 barrels per day. The increased production was larger and quicker than markets had been anticipating.
Helima Croft, global head of commodity strategy at RBC Capital Markets, said Thursday on CNBC’s “Power Lunch” that the decision stemmed from internal disagreements among OPEC+ members.
“The countries that are driving this decision are saying, ‘Look, everyone thinks we need $90 oil. We want to show you we don’t need higher prices. We’re prepared to endure lower prices for a period,'” Croft said.
The U.S. policy stance toward Iran and Venezuela — both major oil producers — could be another factor to watch with energy prices in the future, Croft added.
To be sure, lower oil prices could help offset a rise in the price of other goods caused by the global trade war. The Trump administration has touted higher energy production and lower prices as a way to combat stubborn inflation that remains above the Federal Reserve’s 2% target.
