Oil prices posted their steepest monthly decline since late 2021 on Wednesday, following indications from Saudi Arabia that it may increase production to gain market share, while concerns over global fuel demand persist due to escalating trade tensions.
Brent crude futures fell by $1.13 (1.76%) to close at $63.12 per barrel, while U.S. West Texas Intermediate (WTI) dropped $2.21 (3.66%) to settle at $58.22. For the month, Brent and WTI are down over 15% and 18%, respectively — the biggest monthly declines since November 2021.
Saudi Arabia Signals Strategic Shift
Market pressure intensified after Saudi Arabia — a top global oil producer — indicated it is not planning further production cuts and is prepared to weather a period of lower prices.
Phil Flynn, senior analyst at Price Futures Group, commented:
"This raises the risk of a new production war. Is Saudi Arabia signaling a move to reclaim market share? That’s the question investors are now asking."
OPEC+ to Discuss Output Hike, Geopolitical Moves Add to Supply Outlook
Sources told Reuters last week that several OPEC+ members are expected to propose a second consecutive monthly increase in output at their upcoming May 5 meeting.
Analysts at PVM noted that continued OPEC+ supply expansion, coupled with potential breakthroughs in Ukraine and Iran, could flood the global oil market with additional barrels — just as the trade war weighs on demand recovery hopes.
Trade War and Economic Slowdown Add Downward Pressure
The slide in oil prices was triggered earlier in April when U.S. President Donald Trump announced tariffs on all imports, prompting China to retaliate. The tariff tit-for-tat has sparked a trade war between the world’s two largest oil-consuming economies.
Fresh data on Wednesday showed that the U.S. economy contracted in Q1, driven in part by a surge in imports as companies rushed to beat tariff deadlines.
According to a Reuters poll, Trump’s trade policies could push the global economy into recession this year.
U.S. Inventory Drop Provides Limited Support
Despite the downward trend, oil prices found some support from a surprising drop in U.S. crude inventories last week.
The U.S. Energy Information Administration (EIA) reported a 2.7 million barrel decline, bringing stockpiles down to 440.4 million barrels, compared to analyst expectations of a 429,000 barrel increase.
