Oil prices set for steep April losses; weak Chinese data adds to growth fears

Investing.com-- Oil prices retreated Wednesday, set for their largest monthly drop in over three years as weak Chinese manufacturing data added to fears of slowing global demand growth. 

At 08:15 ET (12:15 GMT), Brent oil futures for June fell 0.7% to $62.83 a barrel, while West Texas Intermediate crude futures dropped 0.7% to $59.98 a barrel, trading below the key $60 a barrel support level.

The Brent contract was set to drop around 14% in April, while WTI prices were trading down nearly 16% this month - their worst monthly falls since November 2021, Prices had briefly hit a four-year low earlier in April.  

Chinese PMI data disappoints

Chinese manufacturing activity disappointed in April, as the world’s largest crude importer was hit hard by a bitter tariff exchange with the United States.

The manufacturing PMI shrank as overseas orders fell sharply, with factory activity contracting at the fastest pace in 16 months in April, while non-manufacturing growth slowed, government data showed on Wednesday.

The reading highlighted the impact of a U.S.-China trade war on the world’s second-largest economy, adding to anxiety over slowing economic growth.

Uncertainty over U.S.-China trade talks was the biggest weight on crude in recent weeks, as both countries became embroiled in a bitter trade war. U.S. officials claimed they were in dialogue with China, while Beijing denied any such talks were taking place.

Earlier, Saudi Arabia reduced its official selling price for its Arab Light grade into Asia for May loading by US$2.30/bbl – the biggest cut since 2022.

U.S. inventories grow more than expected - API 

Data from the American Petroleum Institute, released on Tuesday, indicated that U.S. oil inventories grew 3.76 million barrels (mb) in the past week, substantially more than expectations for a build of about 0.39 mb. 

The reading pushed up concerns that U.S. oil supplies remained high, while fuel demand in the country was softening amid heightened economic ructions. 

The API data usually heralds a similar reading from government inventory data, which are due later on Wednesday. 

OPEC+ meeting draws near 

The focus in the coming days will be on a meeting of the Organization of Petroleum Exporting Countries and allies (OPEC+), with the cartel widely expected to announce output hikes for June when it meets next week.

"The very real possibility that OPEC+ will continue to bring extra barrels to the market as it fights to keep order within its ranks is added to the diplomatic thrusts in Ukraine and Iran, which if successful means more international crude on the water at a time when a trade war will squash any hope of demand growth," said PVM analysts.

Russia-Ukraine ceasefire talks are also in focus, with any signs of progress likely to herald increased oil supplies. Russia announced a three-day ceasefire in early-May. 

(Ambar Warrick contributed to his article.)