Oil prices fell on Friday, heading for their first monthly decline since November, as global economic growth uncertainties and potential fuel demand reductions weighed on the market. The more active May Brent crude futures slipped 31 cents, or 0.4%, to $73.26 a barrel by 6:48 a.m. Saudi time, while U.S. West Texas Intermediate crude futures were at $70.04 a barrel, down 31 cents, or 0.4%. The front-month Brent contract, expiring later on Friday, traded at $73.69, down 35 cents, or 0.5%.
Several factors have contributed to this downward trend. The Trump administration’s proposed tariffs on imports from Canada, Mexico, and China have heightened concerns about a potential global economic slowdown. These tariffs, set to take effect on March 4, include a 25% levy on all imports from Canada and Mexico, with a 10% tariff specifically on Canadian crude oil and energy products. Additionally, there is a threat to double existing tariffs on imports from China, the world’s largest crude importer.
The Atlanta Federal Reserve’s GDPNow tracker has revised its forecast for the U.S. economy’s first-quarter growth to a contraction at a 1.5% annual rate, down from a previously predicted 2.3% expansion. This adjustment follows a significant increase in January’s trade deficit, partly driven by a surge in imports ahead of the anticipated tariffs. Consumer spending also saw a notable 0.5% drop in January after adjusting for inflation, marking the largest decline in three years.
In Europe, data showed the German economy shrank by 0.2% in the final quarter of 2024 from the previous quarter. This contraction adds to the concerns about a broader economic slowdown, which could further dampen global oil demand.
On the supply side, several developments are influencing market dynamics. The Organization of the Petroleum Exporting Countries and its allies plan to increase oil output in April. Additionally, the possibility of a peace deal between Russia and Ukraine could lead to the lifting of sanctions on Russian oil, potentially increasing global supply. In Iraq, BP has signed a deal to redevelop four Kirkuk oil and gas fields, and the country is awaiting Turkey’s approval to restart oil flows from the Iraqi Kurdistan region. Nigeria’s oil production has also risen to 1.8 million barrels per day, up from just 1 million barrels per day over a year ago.
In the United States, President Trump has expressed support for the construction of the Keystone XL pipeline, pledging easy regulatory approvals for the project that would transport crude from Canada to the U.S. This move could further influence North American oil supply dynamics.
Market analysts suggest that the outlook for oil has worsened due to uncertainties about the economy and consumer demand. The proposed tariffs are increasingly being viewed as a negative influence on global economic growth, potentially leading to additional downward revisions in world oil demand. While technical support for WTI remains between $66 and $69 per barrel, it is under pressure from bearish short sellers.
