Investing.com -- Brent crude oil could fall to $50 a barrel for a few weeks in a worst-case scenario, Bank of America (NYSE:BAC) warned, as sweeping new U.S. tariffs and an unexpected OPEC+ production hike trigger what the brokerage called a “negative commodity demand shock.”
BofA said its $70/bbl average Brent forecast for 2025 is now at risk.
“If supply/demand balances weaken by over 1mn b/d in the coming quarters, Brent could even drop to $50/bbl for a few weeks,” analysts wrote.
Trump administration’s sweeping tariff announcements, including new levies on imports from China, the EU, and other major economies has given a dual shock to global markets.
“Unexpected tax increases on imported US goods are a negative supply shock akin to an oil price spike for American consumers and corporations,” BofA said.
“Tariffs are also a negative demand shock for the rest of the world. With costs set to increase, quantities demanded will fall.”
The move comes as OPEC+ tripled its planned production increase for May, adding further pressure to an already weakening energy market.
BofA said commodities had outperformed equities and bonds in Q1 with an 8.9% gain in the Bloomberg Commodity Index (BCOM), but those returns have now been wiped out.
The bank warned global GDP growth could be cut by at least 0.5 percentage points from the current 3.1% estimate, citing uncertainty and reduced demand stemming from the trade war.
Despite the gloomy outlook, BofA flagged three possible supports for energy prices: a stagflationary macro backdrop, geopolitical disruptions (including Iran, Venezuela and Russia), and the possibility of future “tariff relief.”
Elsewhere in commodities, the bank said tightness in metals markets is easing, though macro fears may overwhelm fundamentals. Copper could be next in line for a 25% tariff following a Section 232 investigation, while gold could benefit from risk-off flows.
In agriculture, soybeans are already under pressure after China raised tariffs on all U.S.-origin goods to 34% and the EU — Washington’s second-largest soy buyer — faces new U.S. tariffs. “Tariffs could trigger a bear move in soy,” BofA said, though it noted the impact may not be as severe as during the 2018-19 trade war.
