OIL prices extended declines yesterday and were set for their largest monthly drop in more than three years as the global trade war eroded the outlook for fuel demand, while fears of mounting supply also weighed.
Brent crude futures fell by 83 cents, or 1.29 per cent, to $63.42 per barrel early yesterday. US West Texas Intermediate crude futures dropped 92 cents, or 1.52pc, to $59.50 a barrel.
Brent and WTI have lost 15pc and 17pc respectively so far this month, the biggest percentage drop since November 2021.
Both benchmarks slumped after US President Donald Trump’s April 2 announcement of tariffs on all US imports. They then sank further to four-year lows as China responded with its own levies against US imports, stoking a trade war between the top two oil-consuming nations.
Trump’s tariffs on imports into the US have made it probable the global economy will slip into recession this year, according to a Reuters poll.
China’s factory activity contracted at the fastest pace in 16 months in April, a factory survey showed yesterday.
Worries about demand amid the trade war have weighed on investor sentiment, said ANZ bank senior commodity strategist Daniel Hynes.
“There are also concerns that recent strength in US economic data was only temporary, due to stockpiling ahead of the tariffs that now appears to be abating,” he added.
US consumer confidence slumped to a nearly five-year low in April on growing concerns over tariffs, data showed on Tuesday.
Recent signs of a de-escalation in the trade wars, including a pair of orders Trump signed on Tuesday to soften the blow of his auto tariffs, eased some jitters among global investors.
That said, analysts believe the oil market will stay under pressure as the Trump administration continues to prioritise lower oil prices to manage inflation.
Oil prices were also undermined by fears of mounting supply from the Organisation of the Petroleum Exporting Countries and their allies, known as Opec+.
Several Opec+ members will suggest a ramp-up of output hikes for a second straight month in June, sources told Reuters last week. The group will meet on Monday to discuss output plans.
On the supply front, US crude oil inventories rose by 3.8 million barrels last week, market sources said on Tuesday citing American Petroleum Institute data.
Meanwhile, Saudi Arabian officials are briefing allies and industry experts to say the kingdom is unwilling to prop up the oil market with further supply cuts and can handle a prolonged period of low prices, five sources with knowledge of the talks said.
This possible shift in Saudi policy could suggest a move towards producing more and expanding its market share, a major change after five years spent balancing the market through deep output as a leader of the Opec+ group.
Those cuts supported prices, in turn bolstering the oil export revenue that many oil producers rely on.
The Saudi government’s communications office did not reply to a Reuters request for comment on the matter.
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