Oil prices plunged after Saudi Arabia cut prices on its flagship crude by the steepest margin in over two years. At the same time, escalating trade tensions stoked fears of a global recession and weaker energy demand, adding further pressure to already volatile markets.
Brent and WTI Fall Sharply
Brent crude dropped nearly 4% to $63.01 a barrel, reaching its lowest level in four years before partially recovering. West Texas Intermediate (WTI) also declined, trading at $60.63. The sharp decline followed Saudi Aramco’s unexpected decision to lower the price of its Arab Light crude for its key Asian customers, cutting deeper than analysts anticipated.
OPEC+ Output Hike Amplifies Downward Pressure
The price cuts came just days after the OPEC+ alliance announced a surprisingly large production increase, catching the market off guard. The timing of Saudi Arabia’s moves intensified concerns that a supply glut may be forming, especially as global demand signals weaken.
Market Sentiment Turns Bearish
Investor sentiment remained deeply negative at the start of the week. “Markets are beginning the week still in the throes of panic,” said Vandana Hari, founder of Vanda Insights in Singapore. “No one dares pick a bottom or stand in the way of the selling tsunami,” she added.
A key market metric, the Brent crude spread between December 2025 and December 2026, briefly flipped into contango, where the nearer contract traded below the longer-term one. This structure typically reflects oversupplied conditions and weaker near-term demand.
Commodities and Equities Hit by Risk Aversion
Oil wasn’t alone in its downturn. A broad risk-off sentiment swept across commodities and equities alike, driven by intensifying US-China trade tensions and retaliatory tariffs. The combination of rising output and falling demand expectations has reawakened fears of an oversupplied oil market.
“It’s going to remain downhill by default for all risk assets,” Hari warned, “until Trump says or signals something that prompts investors to pause and reassess their recession fears.”
Saudi Cuts Extend Beyond Asia
Although Asia saw the steepest price reductions, Saudi Arabia also lowered prices for buyers in the US and Europe — though the cuts there were smaller. The price move followed pressure from US President Donald Trump, who had urged OPEC+ to reduce oil prices in a bid to fight inflation and intensify economic pressure on Russia amid the ongoing war in Ukraine.
Gasoline Futures Also Decline
In product markets, gasoline futures in New York fell nearly 3%, marking their lowest level since February. As reported by thehindubusinessline.com, the drop reflects broader weakness across fuel markets amid dimming demand prospects and heightened supply concerns.
