Oil prices on track for biggest monthly drop since 2021 as trade war sparks recession, demand fears

Wed, Apr 30, 2025, 12:52 PM 2 min read

Crude oil prices are headed for their worst monthly drop since 2021 as fears over a global economic downturn and demand shock as a result of tariffs come as the supply of oil is about to surge.

West Texas Intermediate (CL=F) crude oil prices, the US benchmark, were down over 3.5% on Wednesday to trade as low as $58.20 a barrel, while Brent crude (BZ=F), the international benchmark, also fell over 3.5% to as low as $60.93 a barrel.

WTI crude oil prices have lost over 16% this month, while Brent crude has dropped closer to 17%, the largest monthly decline since November 2021.

Wednesday's drop followed data out early Wednesday that showed the US economy contracted in the first quarter for the first time in three years. Labor market data also showed slower hiring in the US than forecast, a signal that tariffs may be weighing on economic growth.

Read more: What Trump's tariffs mean for the economy and your wallet

These reports followed data out of China this week that showed factory activity in the country contracting at the fastest rate in over a year, stoking further worries that the US-China trade spat will hurt growth and, in turn, global oil demand. China is the world's largest crude oil importer.

An increase in supply is also expected next month from the Organization of Petroleum Exporting Countries and its allies (OPEC+), putting pressure on prices. A report from Reuters suggested that another increase in production is being contemplated to take effect in June.

The S&P 500 (^GSPC) has been in recovery mode in recent weeks, recovering some of its steep early April declines amid an optimistic tone from Trump officials on tariff reprieves and potential deals.

Oil prices, however, have not seen the kind of support from investors enjoyed by stocks during a moderating of trade tensions through April.

"While the recent de-escalation in trade talks has certainly reduced the probability of a bear case, that doesn’t imply that the 'Trump put' extends over the energy sector, as President Trump and his aides continue to pursue lower oil and gasoline prices — as low as $50 per barrel," wrote JPMorgan's Natasha Kaneva and her team on Tuesday.

On the demand side, "the markets may be underestimating the final tariff levels that the Trump administration plans to impose on US imports," said Kaneva.

On the consumer side, gas prices have actually risen over the month of April amid increased demand and better weather across much of the country. Data from AAA showed the average per-gallon cost of regular gas stood at $3.18 as of Wednesday, up from $3.16 a month ago.