Oil Below $40 Isn’t a Joke! Tariffs Hit the Global Economy, and OPEC Throws in the Towel

TradingKey - In today’s capital markets—whether it’s equities, bonds, currencies, or commodities—global investors are feeling the chilling effects of Trump’s tariffs on the world economy. Following a plunge in international oil prices to their lowest levels in four years, Goldman Sachs has presented an extreme scenario: Brent crude oil falling below $40 per barrel.

As of April 8, the price of WTI crude oil was trading at $60.99 per barrel, down 1.61% intraday and 14.44% month-to-date. Brent crude oil stood at $64.48 per barrel, down 2.24% on the day and 14.70% so far in April.

The sharp drop in oil prices is primarily driven by OPEC’s unexpected return to production increases and the ongoing tariff war initiated by the  United States. On April 3, OPEC+ announced plans to boost daily crude oil production by 411,000 barrels starting in May—three times the expected increase.

Sources indicate that OPEC’s surprising decision was prompted by  Saudi Arabia’s growing frustration with member states failing to fully comply with prior production cut agreements. Saudi Arabia has been a leading advocate for supply cuts, aiming to maintain oil prices near $90 per barrel.

According to Reuters, this latest move marks a significant shift in Saudi Arabia’s energy policy.

Amid expectations that Trump’s tariff plan will hinder global economic growth, several Wall Street firms—including Goldman Sachs and Morgan Stanley—have revised their oil price forecasts downward. Meanwhile, China has pledged to counter the U.S. tariff policies, and the EU, along with other nations, are considering retaliatory measures, casting a further shadow over global growth prospects.

In its April 7th report, Goldman Sachs projected that under its baseline scenario, Brent crude oil would fall to $58 per barrel by the end of 2025 and to $50 per barrel by the end of 2026.

However, in a more extreme—and less likely— scenario involving both a global GDP slowdown and a complete unwinding of OPEC+ cuts, which would discipline non-OPEC supply, Goldman estimates  Brent could drop to just under $40 a barrel in late 2026.

Additionally, Goldman Sachs has recently raised the probability of a U.S. recession to 45%, while JPMorgan places the likelihood at 60%.