Oil prices swooned and settled close to to multi-month lows after reports of OPEC+ plans to proceed with output increases in April and news of U.S. tariffs on Canada, Mexico and China as well as Beijing's retaliatory tariffs.

Brent futures settled 58 cents lower, or 0.8%, at $71.04 a barrel. The session low was $69.75 a barrel, its lowest since September.

U.S. West Texas Intermediate (WTI) crude fell 11 cents a barrel, or 0.2%, at $68.26. The benchmark previously dropped to $66.77 a barrel, the lowest since November.

OPEC+, the Organization of the Petroleum Exporting Countries and allies including Russia, decided on Monday to proceed with a planned April oil output increase of 138,000 barrels per day, its first since 2022.

The move took the market by surprise, said Bjarne Schieldrop, chief commodities analyst at SEB.

"The change in OPEC strategy looks like they are prioritising politics over price. Those politics are likely connected with the wheeling and dealing of Donald Trump," Schieldrop said, referring to the U.S. president's calls for lower oil prices.

U.S. tariffs of 25% on imports from Canada and Mexico took effect at 12:01 a.m. EST (0501 GMT), with 10% tariffs on Canadian energy, while tariffs on imports of Chinese goods were increased to 20% from 10%.
Analysts expect the tariffs to curb economic activity and demand for energy, weighing on oil prices.

China swiftly retaliated, announcing 10-15% increases on import levies covering a range of American agricultural and food products while also placing 25 U.S. companies under export and investment restrictions.
Prices steadied later in the session.

Further, some geopolitical tension moderated after Ukrainian President Volodymyr Zelenskiy said he regretted last week's extraordinary Oval Office clash with Donald Trump. Sources told Reuters the U.S.-Ukraine minerals deal would be signed soon.

On Monday, Trump paused all U.S. military aid to Ukraine. The move followed a Reuters report that the White House has asked the State and Treasury departments to draft a list of sanctions that could be eased for U.S. officials to discuss during talks with Moscow.

Lifting sanctions could bring more Russian oil to market. But on Monday, Goldman Sachs analysts said Russia's oil flows were constrained more by its OPEC+ production target than sanctions.

The bank also said higher-than-expected crude supply and a demand squeeze from softer U.S. economic activity and tariff escalation posed downside risks to oil price forecasts.

Chinese demand is also down, with a period of refinery maintenance looming, said Josh Callaghan, head of crude derivatives at Arrow Energy Markets.

The Trump administration said on Tuesday it was ending a license that the U.S. has granted to U.S. oil producer Chevron (NYSE:CVX) since 2022 to operate in Venezuela and export its oil, after Washington accused President Nicolas Maduro of not making progress on electoral reforms and migrant returns.
Market participants now await government data on U.S. crude stockpiles, due on Wednesday. U.S. crude oil stocks fell by 1.46 million barrels in the week ended February 28, market sources said, citing American Petroleum Institute figures on Tuesday.

Source: Investing.com