Record drops in oil prices on the horizon, marking monthly decrease of similar scale to 2021.
NEW YORK: Oil prices took a nosedive on Wednesday, teetering towards their largest monthly plummet in nearly three and a half years. Saudi Arabia's hint at escalating production and grabbing market share sent shockwaves through the industry as the global trade war cast dark shadows over fuel demand.
Brent crude was down $1.16, or 1.81%, at $63.09 a barrel by 1:00 p.m. EDT (17:00 GMT). US West Texas Intermediate crude crashed $2.38, or 3.94%, to $58.04.
Over the course of the month, both benchmarks have dropped about 15% for Brent and 18% for WTI - the biggest falls since November 2021.
The oil market reacted dramatically after Saudi Arabia, one of the world's biggest oil producers, showed signs of reluctance to support the market further with supply cuts and exhibited a willingness to endure a prolonged period of reduced prices.
"This could fan the flames of another production war," remarked Phil Flynn, senior analyst with Price Futures Group. "Are the Saudis attempting to send a message that they want to regain their market share? We'll see."
Earlier in the month, Saudi Arabia pushed for a larger-than-planned OPEC+ output hike in May.
*Oil prices plummet 2pc to 2-week low*
Several OPEC+ members are expected to propose a second consecutive month of significant output increases in June, sources informed Reuters last week. The group's meeting is scheduled for May 5 to discuss output plans.
"There's a very real chance that OPEC+ will keep on delivering extra oil to the market as it grapples to preserve order within its ranks. This comes as countries like Ukraine and Iran take center stage with diplomatic maneuvers, potentially leading to more international oil supply at a time when a trade war is poised to dampen any hopes of increased demand," said PVM analysts.
U.S. President Donald Trump's announcement of tariffs on all US imports on April 2 was met with China's own retaliatory duties, igniting a trade war between the world's largest oil-consuming nations.
The specter of a weakening global economy resulted in ongoing pressure on oil prices.
Wednesday's data revealed that the US economy contracted in the first quarter, primarily due to an influx of goods imported by businesses eager to dodge higher costs.
Trump's tariffs could very well push the global economy into a recession this year, suggested a Reuters poll.
U.S. consumer confidence, meanwhile, hit an almost five-year low in April due to increasing anxiety about tariffs, as per Tuesday's data.
U.S. crude oil stockpiles shrunk unexpectedly last week, owing to higher export demand and increased refinery activity. Crude inventories dropped by 2.7 million barrels to 440.4 million barrels in the week ending April 25, according to the Energy Information Administration, contrary to analysts' assumptions in a Reuters poll that predicted a rise of 429,000 barrels.
- The weakening global economy, exacerbated by the trade war, has resulted in ongoing pressure on oil prices, causing a potential regain of market share for Saudi Arabia as they show a willingness to endure reduced prices, leading to a plummet of 2% in oil prices to a 2-week low.
- Although US crude oil stockpiles unexpectedly shrunk last week due to higher export demand and increased refinery activity, the Brent and US West Texas Intermediate crudes dropped about 15% and 18% respectively, marking the biggest falls since November 2021.
- The specter of a weakening global economy and Trump's tariffs could very well push the global economy into a recession this year, impacting the futures of not only oil prices but also sports, entertainment, and other industries.
- With several OPEC+ members expected to propose a second consecutive month of significant output increases in June, and the Saudis pushing for a larger-than-planned OPEC+ output hike in May, the growth in oil supply could lead to increased competition and potentially a new production war.
