Oil set for biggest monthly drop since 2021 on growth woes

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(Bloomberg) — Oil headed for its largest monthly decline since November 2021 on signs the US-led trade war is hurting economic growth and energy demand at a time when the OPEC+ alliance has been loosening supply curbs.

Global benchmark Brent — which fell near $63 a barrel on Wednesday — has shed more than 15% this month. West Texas Intermediate crude was again in the upper $50s.

As a vital industrial commodity, oil is often subject to huge monthly swings, from turning negative during the pandemic in 2020 to touching almost $140 a barrel when Russia invaded Ukraine. So far this year, the global benchmark has averaged close to $73 a barrel, the lowest since 2021.

The US economy contracted for the first time since 2022 in the first quarter as a result of a massive surge in pre-tariff imports and softer consumer spending. In China, factory activity slipped into the worst contraction since December 2023, revealing early damage from the trade war.

Crude has been battered this month, touching a four-year low, as US President Donald Trump’s sweeping trade levies — especially on top importer China — have blunted the outlook for energy consumption.

On the supply side, OPEC+ has been easing output curbs, with JPMorgan Chase & Co. warning the cartel may accelerate planned production increases at a meeting next week.

“Synchronised weakness in US and China data is highlighting the negative impact of the trade war on pro-cyclical commodities with crude and copper both falling ahead of a long China holiday,” said Ole Hansen, head of commodities strategy at Saxo Bank.

In the US, nationwide commercial crude stockpiles climbed 3.8 million barrels last week, according to an estimate from the American Petroleum Institute, which also saw a modest increase at the key hub in Cushing, Oklahoma. Official data on holdings are due later on Wednesday.

Trump said China deserved the steep tariffs he’d imposed on their exports, according to remarks to ABC News. He added that he did not believe hard times were ahead for US consumers, while acknowledging that his 145% tariffs on many Chinese goods amounted to a near-embargo.

OPEC+ rocked the crude market in early April, with a surprise decision to increase supply in May by 411,000 barrels a day, the equivalent of three monthly tranches from a previous plan. Oil traders expect Saudi Arabia to steer OPEC+ to agree on another supply surge next week.

Beyond OPEC+, non-cartel nations are also expected to add supplies, including drillers in Canada and Guyana, feeding concerns about a global glut. Morgan Stanley has said it expects a “meaningful surplus” to develop over time, though nearer-term metrics suggest tightness.