By Nicole Jao
NEW YORK (Reuters) – Oil prices fell on Wednesday and were set for their largest monthly drop in almost three and a half years after Saudi Arabia signaled a move toward producing more and expanding its market share, while the global trade war eroded the outlook for fuel demand.
Brent crude futures were down $1.16, or 1.81%, at $63.09 a barrel by 1:00 p.m. EDT (17:00 GMT). U.S. West Texas Intermediate crude futures dropped $2.38, also 3.94%, to $58.04.
So far this month Brent and WTI have lost about 15% and 18% respectively for the biggest percentage falls since November 2021.
Both benchmarks slumped after Saudi Arabia, one of the world’s biggest oil producers, signaled it was unwilling to prop up the oil market with further supply cuts and could handle a prolonged period of low prices.
“It raises concern that we could be headed towards another production war,” said Phil Flynn, senior analyst with Price Futures Group. “Are the Saudis trying to send a message that they are going to get back their market share? We’ll have to wait and see.”
Earlier this month, Saudi Arabia pushed for a larger-than-planned OPEC+ output hike in May.
Several OPEC+ members will suggest a ramp-up of output increases for a second straight month in June, sources told Reuters last week. The group will meet on May 5 to discuss output plans.
“The very real possibility that OPEC+ will continue to bring extra barrels to the market as it fights to keep order within its ranks is added to the diplomatic thrusts in Ukraine and Iran, which if successful means more international crude on the water at a time when a trade war will squash any hope of demand growth,” said PVM analysts.
U.S. President Donald Trump’s announced tariffs on all U.S. imports on April 2 and China responded with its own levies, stoking a trade war between the world’s top two oil-consuming nations.
Concerns over the global economy weakening continued to pressure oil prices.
Data on Wednesday showed the U.S. economy contracted in the first quarter, weighed down by a deluge of goods imported by businesses eager to avoid higher costs.
Trump’s tariffs have made it probable the global economy will slip into recession this year, a Reuters poll suggested.
U.S. consumer confidence, meanwhile, slumped to its lowest in nearly five years in April on growing concerns over tariffs, data showed on Tuesday.
U.S. crude oil stockpiles fell unexpectedly last week on higher export and refinery demand, limiting some price losses.
Crude inventories fell by 2.7 million barrels to 440.4 million barrels in the week ended April 25, the Energy Information Administration said on Wednesday, compared with analysts’ expectations in a Reuters poll for a 429,000-barrel rise.
(Reporting by Shadia Nasralla; Additional reporting by Ahmad Ghaddar in London and Siyi Liu in Singapore; Editing by Peter Graff, David Goodman and Nia Williams)
