Oil Prices Decline Amid Trade War and Supply Concerns

Oil prices experienced further declines on Wednesday, heading towards their most significant monthly drop in over three years. This downturn is attributed to the global trade conflict dampening prospects for fuel demand, compounded by anxieties about increasing supply levels.

Brent crude futures decreased by 72 cents, a 1.12% reduction, settling at $63.53 per barrel as of 0404 GMT.

US West Texas Intermediate crude futures saw a decrease of 70 cents, equivalent to 1.16%, reaching $59.71 a barrel.

Both Brent and WTI have seen substantial losses this month, with drops of 15% and 16% respectively, marking the largest percentage decline since November 2021.

The downward pressure on both benchmarks began following the announcement of tariffs on all US imports. These losses intensified after China retaliated with its own tariffs on US imports, escalating trade tensions between the world’s two largest oil-consuming nations.

According to a recent poll, the tariffs imposed by the United States on imports have heightened the probability of a global economic recession this year.

A survey released on Wednesday indicated that factory activity in China experienced its most rapid contraction in 16 months during April.

Daniel Hynes, a senior commodity strategist at ANZ bank, noted that concerns regarding demand amid the trade war have negatively impacted investor sentiment.

Quoting 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.

Data released on Tuesday revealed that US consumer confidence has fallen to a nearly five-year low in April, primarily due to increasing anxieties over tariffs.

Recent indications of a potential de-escalation in the trade disputes, including actions taken to mitigate the impact of auto tariffs, have somewhat alleviated concerns among global investors.

However, analysts anticipate that the oil market will remain under pressure as the current administration continues to prioritize lower oil prices to manage inflation.

Concerns Over Supply Levels

Oil prices have also been affected by concerns about increasing supply from OPEC+.

According to sources, several OPEC+ members are considering suggesting an increase in output hikes for the second consecutive month in June. The group is scheduled to convene on May 5 to discuss production plans.

Regarding supply, data from the American Petroleum Institute indicated that US crude oil inventories increased by 3.8 million barrels last week.

Official US government data on stockpiles is expected later today. Analysts anticipate, on average, a 400,000 barrel increase in US crude oil stocks for the past week.