Oil prices steady amid OPEC+ uncertainty and demand concerns

[WORLD] Oil prices held steady in early Asian trading on Thursday, regaining some ground after a sharp drop the previous day sparked by indications that Saudi Arabia might boost production and data showing a contraction in the U.S. economy.

As of 0318 GMT, Brent crude futures edged up 7 cents, or 0.1%, to $61.13 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose 1 cent, or 0.02%, to $58.22, after settling at their lowest level since March 2021 on Wednesday.

The recent swings in oil markets underscore the broader uncertainty surrounding global supply dynamics and mounting economic pressures. With OPEC+ nations at odds over production strategies, traders are preparing for policy shifts that could either support or further weigh on prices. Analysts also point to persistent geopolitical risks, including continued disruptions in Russian exports due to sanctions, as a key variable influencing the market's direction.

“In the near term, the path of least resistance remains tilted to the downside,” said Sugandha Sachdeva, founder of New Delhi-based research firm SS WealthStreet.

“The combination of weakening demand and the prospect of expanding supply has created a bearish outlook for crude, with Brent crude potentially testing the $55 mark,” Sachdeva added.

Saudi Arabia has reportedly communicated to allies and industry sources that it is not inclined to support prices through further supply cuts and is prepared to tolerate a prolonged period of lower oil prices, Reuters reported.

This represents a shift from Riyadh’s prior stance of spearheading coordinated output curbs. Market analysts suggest the kingdom may now be focusing on maintaining market share, especially as non-OPEC producers such as the United States continue to increase production. The Biden administration’s recent release of oil from strategic reserves has further complicated the supply picture, adding to an already saturated market.

According to sources familiar with internal OPEC+ discussions, several member states are expected to push for accelerated output hikes in June, following a similar move last month. Eight OPEC+ countries are scheduled to meet on May 5 to finalize production plans for June.

“Any unexpected changes in the pace or scale of output adjustments could trigger renewed volatility in the market,” Sachdeva noted.

In the U.S., the world’s largest oil consumer, the economy contracted in the first quarter for the first time in three years. The downturn was largely driven by a surge in imports as companies rushed to sidestep rising tariffs, highlighting the disruptive effects of former President Donald Trump’s unpredictable trade policies.

Meanwhile, China’s post-pandemic economic recovery continues to falter, further dampening energy demand. Factory output in the world’s second-largest economy has shown signs of slowing, and refinery activity has declined in recent weeks—raising concerns that Asia’s traditional role as a demand driver may not be sufficient to counterbalance weaker consumption in the West.

A Reuters poll suggested Trump’s trade tariffs have increased the likelihood of a global recession this year. The poll also found that a combination of trade-related demand weakness and a potential OPEC+ supply increase is expected to exert downward pressure on oil prices in the months ahead.

Analytics firm Kpler has revised its 2025 global oil demand growth forecast down to 640,000 barrels per day from a previous estimate of 800,000 bpd, citing heightened U.S.-China trade tensions and sluggish demand growth in India.

A separate Reuters survey of 40 economists and analysts in April forecast Brent crude would average $68.98 a barrel in 2025, down from March's projection of $72.94. U.S. crude is expected to average $65.08 a barrel, compared to last month’s estimate of $69.16.

Despite the prevailing negative sentiment, some market participants believe potential supply disruptions could still drive prices higher. Any sustained outage in Libyan production or a flare-up in Middle East tensions could rapidly tighten global supplies. Additionally, the onset of the U.S. summer driving season may provide a temporary lift in demand, although analysts warn that any price rebound is likely to be short-lived amid continued macroeconomic challenges.

U.S. crude inventories fell by 2.7 million barrels last week due to stronger exports and increased refinery activity, the Energy Information Administration reported Wednesday. That contrasts with analysts’ expectations of a 429,000-barrel increase, according to a Reuters survey.