Oil Falls on Expectation of Big OPEC+ Output Hike, Trade Jitters
Oil extended its weekly decline in choppy trading on heightened prospects of more supply from OPEC+ and as US President Donald Trump reignited trade tensions with China.
West Texas Intermediate futures slipped as much as 1.6% to briefly dip below $60 a barrel as OPEC+ was said to consider an output increase of more than 411,000 barrels a day in July, in a push for market share.
Meanwhile, Trump said China had violated its trade agreement with the US, reviving concerns around a tariff war between the world’s two largest economies and its ripple effects on oil consumption.
OPEC+ has already announced unexpectedly large increases for May and June. A sub-group led by Saudi Arabia is set to meet on Saturday to decide on July production levels, following preliminary talks last week on a third consecutive supply increase. The revival of idled output by OPEC and its allies at a faster-than-expected pace has raised concerns around a looming glut and helped to drag oil lower.
Fears over a global economic slowdown due to Trump’s tariffs has also put pressure on prices, though they now face legal uncertainties. A US trade court blocked parts of the president’s levies this week, deeming them illegal, while a federal appeals court has offered a temporary reprieve from the ruling.
Still, some metrics are pointing to near-term strength in the oil market. WTI’s front-month futures were trading about 93 cents more per barrel than the contract for the next month, the biggest premium since early January.
That also comes as Libya’s eastern government threatened to curb oil production and exports in protest after a militia stormed the state-oil company’s headquarters. A shut down could result in a loss of up to 600,000 barrels a day for a month, according to Citi. Further supporting prices, wildfires are putting about 5% of Canada’s crude output at risk as a blaze in Alberta’s oil sands region spreads.
Source: Bloomberg
