Investing.com - Oil prices sank by more than 1% on Friday, putting crude on track for its worst monthly decline since November, as U.S. President Donald Trump added further fuel to trade conflicts with new tariffs on Mexico.
New York-traded West Texas Intermediate crude futures slid 91 cents, 1.6%, at $55.68 a barrel by 7:36 AM ET (11:36 GMT), while Brent crude futures, the benchmark for oil prices outside the U.S., sank $1.21, or 1.9%, to $64.12.
Adding to the recent escalation in in the Sino-U.S. trade dispute, Trump announced that he plans to put 5% tariffs on all Mexican goods entering the U.S. until the flow of undocumented immigrants across the border stops.
Trump’s use of tariffs as a weapon adds to unease that the global economy will take a hit that could go as far as recession, exacerbating the slowdown in demand for oil.
“With Mexico tariffs, Trump goes a step further in killing the oil rally,” Investing.com senior commodity analyst Barani Krishnan said.
“While he’s still doubling down on Venezuelan sanctions, the president’s more conciliatory move towards Iran lately and increasingly belligerent tone on trade with China have been a double dose of pain for both oil-producing countries and proponents of the long game in crude, who lose each time prices fall,” he explained.
OPEC-led production cuts, U.S. sanctions on Iran and Venezuela, along with disruptions in Nigeria or Russia all contributed to a 40% rally in the first four months of the year.
However, U.S. crude has declined around 13% during the month of May as concerns over a slowdown in demand took an increasingly stronger hold over sentiment than bullish signs of tightening supply.
Adding to bearish sentiment this week, the U.S. Energy Information Administration reported a much smaller-than expected decline in U.S. stockpiles along with the fact that production in the U.S. returned to its record 12.3 million barrels per day.
In other energy trading, gasoline futures fell 1.6% at $1.8250 a gallon by 7:38 AM ET (11:38 GMT), while heating oil slumped 1.3% at $1.8933 a gallon.
Lastly, natural gas futures traded up 0.5% at $2.559 per million British thermal unit.