Lagos — Crude oil futures continue to face downside risks, due to escalating trade tensions between the U.S. and China, the world’s two largest economies. The ongoing tariff developments have sparked concerns regarding global economic growth, with the potential for a recession to weigh on fuel demand.
Moreover, the supply outlook, marked by rising global production including increased output from OPEC+, is contributing to concerns of a market surplus. OPEC+ has decided to increase oil production by 411,000 barrels per day starting in May. This decision, coupled with Saudi Arabia’s recent move to lower oil export prices to Asia, points to a potentially bearish view of the market.
However, the declining market could force a change in the supply landscape as producers grapple with lower prices. With U.S. shale producers requiring oil prices above USD 65 per barrel to remain profitable, production could decline in the US, providing some support to the market. Given the current price levels, many producers may have to scale back operations, particularly as rising production costs, exacerbated by tariffs on steel and equipment, threaten profitability.
*George Pavel General Manager at Naga.com Middle East
