Oil Prices Nosedive, Face Worst Monthly Drop Since 2021
Global oil prices continued to slide on Wednesday, with both Brent and WTI crude heading for their biggest monthly losses in over three years, as the ongoing US-China trade war and concerns over excess supply shook investor confidence.
As of 10:30 a.m. Saudi time, Brent crude had fallen by 83 cents to trade at $63.42 per barrel, while US West Texas Intermediate (WTI) dropped by 92 cents to $59.50. This marks a monthly loss of about 15 percent for Brent and 17 percent for WTI — the sharpest drop since November 2021.
The downturn follows a wave of economic uncertainty triggered by the renewed trade spat between the United States and China, the two biggest consumers of oil globally. Oil markets took a heavy hit after US President Donald Trump, on April 2, announced a new round of tariffs on all imports coming into the country. China swiftly responded with its own tariffs, escalating tensions and dragging down global demand forecasts.
There are rising fears that these trade tensions could tip the global economy into a recession this year. A recent Reuters poll supports this sentiment, noting that the protectionist policies could weaken overall economic activity.
Data out of China is already painting a gloomy picture. The country’s factory activity shrank at its fastest pace in 16 months in April, further signalling weakening industrial demand. Meanwhile, US consumer confidence dipped to its lowest point in nearly five years, largely driven by anxiety over the impact of tariffs.
Daniel Hynes, a senior commodity strategist at ANZ Bank, said investors are increasingly worried that the earlier signs of strength in the US economy were only temporary. “It now looks like the boost was due to stockpiling ahead of the tariffs, and that has started to taper off,” he said.
There have been some efforts to calm the storm. President Trump signed a pair of executive orders earlier this week aimed at reducing the effect of his auto tariffs, a move that provided brief relief to the markets. Still, many analysts believe oil prices will remain under pressure, as the US government continues to focus on keeping oil prices low in order to tame inflation at home.
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On the supply side, concerns are also mounting. OPEC and its allies — a coalition often referred to as OPEC+ — may increase oil output for the second month in a row. Sources told Reuters that this will be a key discussion point at their meeting on May 5.
To add to the oversupply worries, US crude inventories rose by 3.8 million barrels last week, according to the American Petroleum Institute. Official data from the US government is expected later today, with analysts projecting a more modest increase of around 400,000 barrels.
With prices falling and pressure mounting from both sides — trade tensions and oversupply — oil producers and investors around the world will be watching closely to see how the market adjusts in the weeks ahead.
