Oil prices have reached their lowest level on Wednesday for more than four years, recording their worst series of losses over five days since March 2022. This tumble has occurred in a context of business war intensification between the United States and China, arousing lively concerns about the global demand for raw materials.
“The aggressive reprisals of Beijing reduce the chances of a rapid agreement and revive fears of recession on a planetary scale,” explains Ye Lin, vice-president in charge of oil markets at Rystad Energy. She adds that the growth of Chinese demand, estimated at 100,000 barrels per day, could be compromised if the conflict continues, despite any recovery measures that Beijing could take.
Multiple pressures on the oil market
To the concerns about demand are added prospects for increasing supply. Saudi Arabia is struggling to enforce production quotas by other OPEC+members. Kazakhstan, Iraq and the United Arab Emirates are particularly pointed out, with an overproduction estimated at 1.2 million daily barrels. The recent OPEC+ decision to increase its production by 411,000 barrels per day in May accentuated downward pressure.
On Wednesday, the Brent was traded at $ 61.40 while the WTI was 58.16 dollars. Since the announcement of new customs taxes on April 2, oil has lost almost 20% of its value. According to Ipek Ozkardeskaya, analyst at Swissquote, the next downward psychological threshold for WTI is at 50 dollars per barrel, a level that has not been observed since January 2021.
Consequences for Saudi Arabia and American producers
This fall in courses raises concerns about the budgetary balance of Saudi Arabia. According to the IMF, the kingdom would need an average price of $ 91 per barrel this year to balance its budget, while oil represents 62% of government income.
Goldman Sachs plans two scenarios for the evolution of the courses. In the first case, if the economy avoids recession thanks to a significant reduction in customs duties, the bank estimates that a barrel could reach 62 dollars at the end of 2025 and 55 dollars at the end of 2026. In the case of a recession, forecasts are even more pessimistic: 58 dollars in December 2025 and 50 dollars in 2026.
Paradoxically, this situation could serve the interests of Saudi Arabia against the United States. It recalls the strategy adopted in 2014, when Riyadh had flooded the market to weaken American shale oil producers. According to a survey by the Federal Reserve Bank of Dallas, the latter need an average price of 65 dollars per barrel to drill a new well, while WTI is now negotiated under 60 dollars.
If prices remain low, American producers could find themselves in difficulty, especially since their operating costs may increase due to customs duties on steel. A drop in American production would then be favorable to the interests of the Middle East, creating a complex geopolitical dynamic around energy prices.
OPEC countries, having struggled to maintain discipline to increase oil prices in recent years, are now facing strategic issues. While Saudi Arabia could return this situation to its advantage in order to weaken American producers by taking advantage of low extraction costs, this crisis reveals the vulnerability of a global energy system subject to diplomatic and commercial vagaries.
Related news :