Oil prices have tumbled to the lowest levels since 2021, fueled by growing economic worry in the wake of a global tariff-driven trade war.
So far in 2025, West Texas Crude oil prices have lost 10%, including a 3% drop in April, despite a recent 9% relief rally.Â
The decline is partly due to President Trump’s “Liberation Day tariff announcement” on April 2, which sparked concern that economies worldwide would slump amid a major reset in trade with the United States.
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Crude oil’s bounce since its April 8 low below $60 per barrel follows a 90-day pause in reciprocal tariffs, excluding a 10% baseline tariff on most of the world. Tariffs on Chinese imports, however, have soared to 145% in a trade war tit-for-tat.
Oil’s big drop is a stark contrast to gold, which is up about 27% this year. It’s more in line with the S&P 500, which has fallen 10% in 2025.
The sell-off in crude oil likely caught many flat-footed, but veteran commodities pro Carley Garner isn’t among them, given her bearishness coming into the year.
“We have a lack of speculative fervor in the crude oil market,” said Garner in a Schwab Network interview on Dec. 30. “I think eventually this is going to weigh on prices…I think the most likely direction is going to be lower.”
Now that oil prices have followed through on Garner’s prediction, she has updated her outlook, offering a blunt take on what could happen to black gold.
Crude oil faces headwinds as economy stumbles, trade war ramps
After delivering 3% GDP growth last summer, the U.S. economy could be in the midst of a painful reckoning.
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There are plenty of reasons for concern:
- Sticky inflation: Inflation has fallen but remains above the Fed’s 2% target.
- A weakening jobs market: Open jobs are declining, while unemployment is rising.
- Tumbling consumer confidence: Americans’ expectations for the future have plummeted.
In March, the ISMÂ manufacturing index PMI fell to 49 from 50.9 in December. Meanwhile, its services index PMI declined to 50.8 from 54. When those measures are below 50, it suggests a contracting economy.
The slowing economic activity is unsurprisingly not helping the jobs market, which has struggled since the Federal Reserve embraced a hawkish interest rate hike policy in 2022.Â
The latest Job Openings and Labor Turnover Survey (JOLTS) showed 7.6 million open positions in February, down 877,000 from one year ago. The unemployment rate has increased to 4.2% from 3.5% as recently as 2023. And layoffs have become more common, especially among high-paying technology and Federal Government workers, due partly to Silicon Valley overhiring during the Covid stimulus era and Department of Government Efficiency (DOGE) job cuts.
In March, companies announced 275,240 layoffs, the largest number of jobs lost in the month of March since Challenger, Gray, & Christmas began tracking the data in 1989.
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Meanwhile, while inflation has retreated from the sky-high 8% levels in the summer of 2022, progress has been slow lately. In March, the Consumer Price Index showed inflation of 2.4%, the same level as observed last September.Â
The stalled inflation progress has sidelined Fed interest rate cuts following reductions in its Fed Funds Rate in September, November, and December, further complicating chances for the economy to find its footing.
And now, 25% tariffs on Canada, Mexico, and autos, a 10% baseline import tax, and staggering China tariffs risk sparking more inflation on everything from clothing to electronics.
Unsurprisingly, consumer confidence has tanked to a 12-year low. In March, the Conference Board’s Expectations Index fell 9.6 points to 65.2, which is solidly beneath the 80 threshold that can signal a recession coming.Â
Economic uncertainty has set the stage for lower oil prices, given that prices tend to head higher when economic activity is thriving rather than retreating.Â
Analyst updates oil outlook after drubbing
Oil prices have not been helped by OPEC’s decision earlier this month to increase production. On April 3, OPEC’s eight members agreed to boost production by 411,000 barrels per day in May.
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More supply amid weakening global demand due to retrenching economies isn’t a recipe for upside, suggesting crude oil prices’ post-pause climb may not be lasting.
“Global oil demand growth for 2025 has been revised down by 300 kb/d since last month’s Report to 730 kb/d, as escalating trade tensions have negatively impacted the economic outlook,” wrote analysts in the IEA’s April Oil Market Report. “Growth is expected to slow further in 2026, to 690 kb/d, but risks to the forecasts remain rife given the fast-moving macro backdrop.”
The dynamic isn’t lost on Garner, who, in an interview with TheStreet, provided updated thoughts on what’s next for crude oil prices.
“Crude oil has had a nice little rally, obviously, in the last week or two. And a lot of that is based on the idea of potential sanctions,” said Garner. “But the reality is, in the big picture, we are very well supplied. So if those sanctions don’t come into play or those entities find ways to get around them, which has kind of been the MO for those types of things. The crude oil price should continue to make lower, lower highs and lower lows.”
Garner’s stairstep lower outlook suggests speculators may want to fade the current oil price rally.
“We’ve basically been seeing every rally get sold into, and I think that’s going to continue,” said Garner. “We’ve been holding the $65 for two or three years. If that level breaks, there’s really nothing stopping it until we get into the low 50s.”
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