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Oil prices set to fall at the fastest rate since 2021

The oil prices dropped on Wednesday, and are set to have their biggest monthly drop in nearly three and a quarter years. Saudi Arabia has signaled that it will increase production and expand its market share. Meanwhile, the global trade conflict is reducing the outlook for fuel consumption.

Brent crude futures fell $1.16 or 1.81% to $63.09 per barrel at 1:00 pm EDT (17:00 GMT). U.S. West Texas Intermediate Crude Futures fell $2.38 or 3.94% to $58.04.

Brent and WTI are down by about 15% and 18%, respectively, this month. This is the largest percentage drop since November 2021.

Both benchmarks fell after Saudi Arabia, the world's largest oil producer, said it would not continue to cut oil supply and that the market could survive a long period of low oil prices.

Phil Flynn is a senior analyst at Price Futures Group. He said: "It makes me worry that we may be heading towards another production battle." Are the Saudis sending a message to their customers that they will regain market share? We'll just have to wait and watch."

Saudi Arabia pushed earlier this month for a higher-than-planned OPEC+ production increase in May.

Sources told us last week that several OPEC+ countries will propose a ramping up of production increases for a 2nd consecutive month in June. The group will discuss plans for output on May 5.

Analysts at PVM said: "The very real chance that OPEC+ continues to bring additional barrels to market in its fight to maintain order within their ranks is added to diplomatic efforts in Ukraine and Iran which, if successful, means more international crude oil on the water during a period when a trade conflict will squash any hopes of demand growth."

U.S. president Donald Trump announced tariffs on U.S. imported goods on April 2, and China responded by imposing its own duties, sparking a trade conflict between the two world's largest oil consumers.

Oil prices continued to be impacted by concerns about the weakening global economy.

Data released on Wednesday revealed that the U.S. economic contraction was exacerbated by the influx of goods imported into the country by companies eager to avoid increased costs.

A poll suggests that Trump's tariffs make it likely the global economy will slide into recession in 2019.

Data showed that the U.S. consumer's confidence fell to its lowest level in almost five years in April, due to growing tariff concerns.

Last week, U.S. crude stockpiles dropped unexpectedly due to higher demand from refineries and exports. This helped limit some price declines.

The Energy Information Administration reported on Wednesday that crude inventories dropped by 2.7m barrels, to 440.4m barrels for the week ending April 25. This was in contrast with the analysts' expectation in a survey of a 429,000 barrel increase. (Reporting and editing by Peter Graff; Additional reporting and editing by Ahmad Ghaddar and Siyi Liu, both in Singapore and London; Reporting and Editing by Shadia Nazarala)

(source: Reuters)