SINGAPORE: Oil prices extended declines on Wednesday 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 percent, to $63.42 per barrel by 10:30 a.m. Saudi time. US West Texas Intermediate crude futures dropped 92 cents, or 1.52 percent, to $59.50 a barrel.
Brent and WTI have lost 15 percent and 17 percent 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 on Wednesday.
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 prioritize lower oil prices to manage inflation.
Oil prices were also undermined by fears of mounting supply from the Organization 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 May 5 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.
US government data on stockpiles is due at 5:30 p.m. Saudi time on Wednesday. Analysts polled by Reuters expect, on average, an 400,000 barrel increase in US crude oil stocks for last week.
