Oil prices settled down on Wednesday and recorded the largest monthly drop in almost 3-1/2 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 settled $1.13, or 1.76%, lower at $63.12 a barrel. U.S. West Texas Intermediate crude futures dropped $2.21, or 3.66%, to close at $58.21, the lowest settlement since March 2021.
For the month, Brent settled down 15% and WTI was down 18%, the biggest monthly percentage declines 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 trade war directly reduces oil demand and hinders travel by consumers. Combined with OPEC’s unwinding of output cuts, the risk of oversupply is escalating," said Raymond James investment strategy analyst Pavel Molchanov.
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.
Reuters
