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Oil prices steady after US economic contraction and possible Saudi supply increase

The oil prices stabilized on Thursday, a day following a sharp decline caused by the signs that Saudi Arabia may increase its output, and data showing the contraction of the U.S. economy, the largest oil consumer in the world.

Brent crude futures dropped 6 cents or 0.1% to $61 per barrel at 0730 GMT. U.S. West Texas Intermediate Crude Futures fell 12 Cents, or 0.2% to $58.09. WTI reached its lowest level since March 2021.

Sugandha Sasdeva, founder and CEO of SS WealthStreet in New Delhi, said that the "path of least resistance" remains to the downside.

Sachdeva stated that "the dual impact of deteriorating oil demand and looming expansion in supply has created a negative outlook for crude. Brent crude appears vulnerable to testing $55 per barrel." Sources say that Saudi Arabia has told allies and experts in the industry that it does not want to support the oil market by cutting supply and is able to manage a long period of low prices. Three people familiar with OPEC+ discussions have reported that several OPEC+ countries will propose the group increase output in June by a significant amount for a second month running. Eight OPEC+ nations will meet on 5 May to decide a plan for June's output. Sachdeva stated that "any surprise in the speed or scale of adjustments to production could have a significant impact on volatility in sessions ahead."

The U.S. economic contraction contracted for the 1st time in 3 years during the first quarter. Businesses rushed to import goods in order to avoid tariffs, which would have increased costs. This underscored the chaotic nature of President Donald Trump’s trade policy.

A poll suggests that Trump's tariffs make it likely the global economy will enter recession this year. An oil price drop is expected this year due to a demand outlook that's clouded by trade conflicts and OPEC+ increasing supply. This was revealed in a Wednesday poll. Kpler, an analytics firm, has revised their 2025 global oil consumption growth forecast from 800,000 barrels per day to 640,000 bpd. They cited rising Sino-U.S. tensions and weak Indian demand. In April, 40 economists and analyst predicted that Brent crude would average $68.98 per barrel in 2025 compared to the estimate of $72.94 in March. The analysts expect U.S. oil to average $65.08 per barrel, rather than the $69.16 last month. The Energy Information Administration reported on Wednesday that U.S. crude stockpiles dropped by 2.7 millions barrels due to higher demand for exports and refineries. This was compared to analysts' expectations, which were based on a poll. They expected a 429,000-barrel increase. Reporting by Mohi Narayan from New Delhi, and Arathy Sommesekhar from Houston; editing by Shri Navaratnam & Christopher Cushing

(source: Reuters)