Oil tumbles as US-China trade war fuels recession fears

LONDON, Apr 7 (Reuters): Oil prices extended losses on Monday, falling around 2% as escalating trade tensions between the United States and China stoked fears of a recession that would reduce demand for oil, while OPEC+ readies a supply increase.

Brent futures were down $1.17, or 1.78%, to $64.41 per barrel at 1303 GMT, and US West Texas Intermediate crude futures were down $1.17, or 1.89%, at $60.82.

The Brent and WTI benchmarks' intra-day lows of $62.51 and $58.95 respectively were their lowest since April 2021.

Oil plunged by 7% on Friday as China ramped up tariffs on US goods, escalating a trade war that has led investors to price in a higher probability of recession. Last week, Brent and WTI lost 10.9% and 10.6%, respectively.

"The uncertainty around tariff policy - that's still very present. You have a number of Wall Street banks slashing economic prospects and calling out much greater probabilities of recession," said Harry Tchilinguirian at Onyx Capital Group. "That's really what's driving sentiment."

Goldman Sachs on Monday forecast a 45% chance of recession in the U.S. over the next 12 months and made downward revisions to its oil price projections. Citi and Morgan Stanley also cut their Brent outlooks. JPMorgan said last week that it sees a 60% probability of recession in the US and globally.

Saudi Arabia on Sunday announced sharp cuts to crude oil prices for Asian buyers, dropping the price in May to the lowest level in four months. "It's a demonstration of the belief that tariffs will hurt oil demand," said PVM analyst Tamas Varga. "It goes to show the Saudis, just like every man and his dog, expect the supply and demand balance to be affected and they are forced to cut their official selling prices."