Oil Prices Decline Amid Trade War and Supply Concerns

Oil prices continued their downward trend on Wednesday, heading towards their most significant monthly decrease in almost three and a half years. This decline is attributed to the ongoing global trade war, which has negatively impacted the outlook for fuel demand, coupled with worries about increasing supply levels.

Brent crude futures experienced a partial recovery from earlier losses but still fell by 63 cents, or 1%, to settle at $63.62 per barrel by 1159 GMT. Similarly, U.S. West Texas Intermediate crude futures decreased by 42 cents, or 0.7%, reaching $60.00 a barrel.

Month-to-date, both Brent and WTI have declined by approximately 15% and 16%, respectively, marking their largest percentage drops since November 2021.

The price slumps initially occurred following the U.S. President’s tariff announcement on all U.S. imports on April 2. Prices then plummeted further to four-year lows as China retaliated with its own levies, intensifying the trade conflict between the world’s two largest oil-consuming nations.

According to a poll, the tariffs imposed are heightening the probability of a global economic downturn this year.

A survey revealed that factory activity in China experienced its swiftest contraction in 16 months during April.

Data released on Tuesday indicated that U.S. consumer confidence has dropped to a near five-year low in April, fueled by growing anxiety over tariffs.

While recent orders signed to mitigate the impact of auto tariffs provided some relief to investors, concerns regarding rising supply from OPEC+ also exerted downward pressure on oil prices.

Several OPEC+ members are reportedly considering advocating for an increase in output hikes for the second consecutive month in June. The group is scheduled to convene on May 5 to deliberate on output strategies.

Analysts suggest that the possibility of OPEC+ continuing to introduce additional barrels into the market, coupled with diplomatic efforts in Ukraine and Iran that could lead to increased international crude availability, coincides with a trade war that stifles demand growth prospects.

Adding to the bearish supply-side signals, U.S. crude oil inventories reportedly increased by 3.8 million barrels last week, according to market sources citing data from the American Petroleum Institute.

Official U.S. government data is expected later today. Analysts anticipate, on average, a 400,000 barrel increase in U.S. crude oil stocks.