Oil dropped as the global trade war hurt the outlook for demand, with data indicating signs of strain in the US economy.
West Texas Intermediate slipped 2.6% to settle around $60 a barrel, the lowest close in more than two weeks. The widely referenced US consumer confidence gauge weakened significantly in data released Tuesday, another sign of the pessimism stemming from President Donald Trump’s levies. Additional reports due this week, including manufacturing data out of China, will shed further light on the economic strength of the world’s biggest importer of crude.
A handful of spreads along the futures curve traded in contango on Tuesday as traders brace for a “meaningful surplus” in the future, according to Morgan Stanley. At present, Brent’s nearer months are still pricier than those next in sequence, forming a rare configuration with little historical precedent, according to the firm.
US crude is on track for the largest monthly loss since 2021, with prices battered by tit-for-tat tariffs between the US and its trading partners, as well as by OPEC+’s plans to revive more production. While many countries are entering into trade negotiations with Washington, Beijing says it has so far declined to engage.
There is now an “elevated probability” that Saudi Arabia and other key OPEC+ nations opt to accelerate planned supply increases at the upcoming May 5 meeting, JPMorgan analysts led by Natasha Kaneva said in a note.
“It is becoming clear to the market that growth over recent months has primarily been driven by stockpiling and pre-tariff hoarding,” said Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management. “That effect is fading, which could lead to a sharp decline in US growth as consumption starts drawing down existing inventories instead of boosting production.”
Geopolitical tensions are showing signs of cooling, increasing the prospect of supplies from some nations. Discussions about the Islamic Republic’s nuclear activity have signaled progress, with the country also pitching its sanctioned economy as an investment opportunity to the US.
Russian President Vladimir Putin declared a new three-day truce in his war on Ukraine that will start on May 8. Still, Putin is insisting that Russia must take control of four regions of Ukraine it doesn’t fully occupy as part of any agreement to end his war.
Elsewhere, Spain and Portugal returned to some semblance of normality after suffering Europe’s worst blackout in years, which forced several oil refineries to halt.
Oil Prices:
WTI for June delivery retreated 2.6% to settle at $60.42 a barrel in New York.
Brent for June settlement fell 2.4% to settle at $64.25 a barrel.
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