By Giulia Petroni

Here is a look at what happened in oil markets in the week of March 31-April 4 and what the focus will be in the days to come.

OVERVIEW: Oil prices sank to their lowest in more than three years as a rapidly escalating trade war and surprise output raise by OPEC+ sent global markets spiraling. The international oil benchmark, Brent crude, is down 5.6% to $66.26 a barrel, while the U.S. oil gauge West Texas Intermediate is down 6.6% to $62.57 a barrel. The benchmarks trade at their lowest since August 2021 and are headed for a weekly loss of nearly 10%.

MACRO: A dramatic escalation in global trade tensions triggered by President Trump's latest tariff blitz sparked a global selloff. While imports of oil, gas and refined products are exempt from the tariff plans, traders fear the measures could stoke inflation and slow economic growth, hurting demand for crude.

Meanwhile, U.S. hiring in March defied expectations despite economic uncertainty and recent concerns about growth. But investors largely brushed off the report, keeping their focus on trade--especially after China moved to retaliated against the U.S.

Federal Reserve Chair Jerome Powell said Friday that the U.S. economy will likely face a period of higher prices and weaker growth because of the larger-than-anticipated tariff hikes, and that the central bank is still comfortable with a wait-and-see approach.

GEOPOLITICAL RISKS: Trump's pressure campaigns against Iran and Venezuela offered some support to oil prices last week amid concerns over tightening supplies. However, the intensifying trade war has diverted attention from other geopolitical developments. In Washington, a bipartisan group of 50 senators introduced a sanctions package into Congress to hit Russia and countries that purchase Russian oil if Moscow refuses to engage in ceasefire negotiations with Ukraine.

SUPPLY AND DEMAND: Demand concerns are back in the spotlight after Trump's tariff announcement. Goldman Sachs cut its global oil demand growth estimates to 600,000 barrels a day in 2025 and 700,000 barrels a day in 2026, from previous expectations of 900,000 barrels a day.

Meanwhile, the Organization of the Petroleum Exporting Countries and its allies stunned the market this week by announcing a larger oil output hike in May, further dragging on tariff-hit crude prices. The group of oil producing countries will now increase output by 411,000 barrels a day next month--the equivalent of three monthly increments.

OPEC+ also stressed the need for some member countries to compensate for producing above their agreed quotas, as tensions within the group mount. "In particular, oil output in Kazakhstan reached record levels--300,000 barrels a day above its quota--in February after an expansion at the Tengiz oil field," Capital Economics' economist Hamad Hussain said.

WHAT'S AHEAD: Fears over the impact of trade tariffs on the global economy will continue to weigh on oil prices for a while. "If the other countries respond to the U.S. tariffs with counter-tariffs, this could set off a spiral of tariffs that would put even more pressure on demand," analysts at Commerzbank Research said.

The U.S. Energy Information Administration is set to release its monthly short-term energy outlook on Tuesday. If the agency revises its global oil demand forecast downward, it could add to bearish sentiment, but analysts don't expect any major adjustments for U.S. oil production. Reports from OPEC and the International Energy Agency are due the following week.

On the macro front, next week's key events include minutes from the Federal Reserve's March meeting due on Wednesday, consumer price index data on Thursday and producer price index figures on Friday.

Write to Giulia Petroni at giulia.petroni@wsj.com

(END) Dow Jones Newswires

April 04, 2025 11:59 ET (15:59 GMT)

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