Trade war puts oil on course for biggest monthly decline since November

Sydney/Singapore — Oil prices fell on Friday and were on track for their biggest monthly fall since November as trade conflicts spread and US crude output returned to record levels.

Front-month Brent crude futures, the international benchmark for oil prices, were at $66.28 at 3.11am GMT, down by 59cents, or 0.9%, from last session’s close.

US West Texas Intermediate (WTI) crude futures were at $56.08 a barrel, down 51c, or 0.9%, from their last settlement. WTI earlier marked its lowest since March 8 at $55.66 a barrel.

The drops mean that crude oil futures are on track for their biggest monthly loss since last November.

US President Donald Trump ramped up trade tension globally by vowing to slap tariffs on all goods from Mexico, firing up fear over economic growth and appetite for oil.

The Mexico trade dispute adds to a trade war between the US and China, which many analysts expect to trigger a recession.

“All is not well with the economic world, at least according to bond and commodity traders,” Michael McCarthy, chief market strategist at futures brokerage CMC Markets in Australia, wrote in a note published on Friday.

“These [price] moves signal deteriorating sentiment about the outlook for global growth,” he said.

US ouput back to record

Crude prices have also been under pressure from a much smaller-than-expected decline in US stockpiles and US crude oil production’s return to its record 12.3-million barrels a day.

The US Energy Information Administration (EIA) said US crude stocks fell by around 300,000 barrels last week, to 476.49-million barrels .

That was much less than the 900,000-barrel decline analysts forecast in a Reuters poll and well below the 5.3-million-barrel drawdown the American Petroleum Institute (API) reported on Wednesday.

Meanwhile, top oil exporter Saudi Arabia has raised production in May, a Reuters survey found, but not by enough to compensate for lower Iranian exports which collapsed after the US tightened the screws on Tehran.

Washington will sanction any country which buys oil from Iran after the expiration of waivers on May 2, US special representative for Iran Brian Hook said on Thursday.

Reuters