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Oil prices drop as economic concerns and supply-demand expectations weigh

Oil prices drop as economic concerns and supply-demand expectations weigh

The oil prices fell on Thursday, after a strong session the day before. This was due to macroeconomic concerns as well as demand and supply expectations. Brent futures were 37 cents lower, or 0.5% at $70.58 per barrel, at 10:25 am EDT (1425 GMT), and U.S. West Texas intermediate crude futures dropped 39 cents or 0.6% to $67.29 per barrel.

Both benchmarks rallied about 2% on Wednesday after U.S. government data showed tighter-than-expected oil and fuel inventories.

Analysts had predicted a 1.9 million barrel decline in gasoline stocks, but the actual drop was 5.7 million. Distillate stocks were also lower than expected, despite gains for crude oil.

Hiroyuki Kikakawa, Nissan Securities Investment's chief strategist, said that declining U.S. gas inventories increased expectations for an increase in seasonal demand this spring. However, concerns over the global impact of tariffs wars also weighed on markets.

He added that "with strong and weak factors moving simultaneously, it is difficult for the markets to lean decisively one way or another." U.S. Donald Trump warned on Wednesday that he would escalate a trade war by imposing further tariffs on European Union products, while major U.S. trade partners announced they would retaliate against trade barriers already put in place by the U.S.

Trump's tariffs have rattled investor, consumer and business confidence, and along with drastic government spending cuts has threatened the stability of the labour market and raised U.S. fears about recession. The U.S. Labor Department reported on Thursday that the number Americans who filed new claims for unemployment benefits dropped last week. Citi analysts say that with the U.S. President's commitment to cheaper oil in the second half 2025, they expect Brent at $60 per barrel. The International Energy Agency (IEA) said Thursday that global oil supply may exceed demand by 600,000 barrels a day this year. It also revised down its demand growth projection for 2025. The Organization of the Petroleum Exporting Countries reported on Wednesday that Kazakhstan was the driving force behind a significant increase in crude production in February by the wider OPEC+. This highlights a challenge facing the producer group to enforce adherence to output targets while it plans to unwind its production cuts.

JP Morgan analysts said that U.S. Transportation Security Administration (TSA) data showed "passenger volume for March has decreased by 5% over the past year, following stagnant traffic during February".

Recent strong global demand numbers have limited the overall market's weakness.

The analysts at JP Morgan added, "Global oil demand was 102.2 million barrels a day on March 11. This is an increase of 1.7 million barrels a day over the previous year and exceeds our projection for the month. Reporting by Trixie Yap, Yuka Obayashi and Paul Carsten from London. Editing by Chizu Nomiyama, Kirsten Donovan)

(source: Reuters)