Oil drops on US economic contraction, possible OPEC+ supply rise

Oil prices fell on Thursday, extending a steep decline the previous session due to signs that Saudi Arabia, the world’s largest crude exporter, could raise production and data showing a contraction in the US economy, the world’s top oil consumer.

Brent crude futures fell $1.1, or 1.8 per cent, to $59.96 a barrel as at 1207 GMT. US West Texas Intermediate crude futures fell $1.14, or 2 per cent, to $57.07.

“The oil market remains concerned about weakening oil demand growth over the coming months due to the trade tensions as well as a faster unwinding of the OPEC+ production cuts,” said UBS analyst Giovanni Staunovo.

Saudi Arabia is telling allies and industry experts that it is unwilling to prop up the oil market with supply cuts and can manage a prolonged period of low prices, sources told Reuters.

Several OPEC+ members will suggest the group accelerates output hikes in June for a second consecutive month, three people familiar with OPEC+ talks have said. Eight OPEC+ countries will meet on May 5 to decide a June output plan.

Meanwhile, the US economy contracted for the first time in three years in the first quarter, swamped by a flood of imports as businesses raced to avoid higher costs from tariffs and underscoring the disruptive impact of President Donald Trump’s unpredictable trade policy.

Trump’s tariffs have made it probable the global economy will slip into recession this year, a Reuters poll suggested.

“The US administration’s volatile tariff policy strategy, especially those involving China, has made traders that were already skittish on the longstanding oversupply this year nervous about loosening fundamentals.” MUFG analyst Ehsan Khoman said.

A demand outlook clouded by trade disputes coupled with an OPEC+ decision to increase supply will weigh on oil prices this year, a Reuters poll showed on Wednesday.

Analytics firm Kpler has lowered its 2025 global oil demand growth forecast to 640,000 barrels per day from 800,000 bpd, citing the China-US trade war and weak Indian demand.

US crude oil stockpiles fell by 2.7 million barrels last week on higher export and refinery demand, the Energy Information Administration said on Wednesday. That compared with analysts’ expectations in a Reuters poll for a 429,000 barrel rise.