DTN Oil Update
Oil Futures Dip on Tariffs and Abundant Supply Expectations
HOUSTON (DTN) -- Oil futures fell Friday on expectations of abundant supplies and weak global demand, amid increasing concerns about a potential recession in the U.S. economy.
As global demand is expected to decline due to the trade war between the United States and China, eight OPEC+ countries are expected to increase crude oil production by 411,000 barrels per day (bpd) in May, in addition to the 2.2 million bpd released in early April.
This week the U.S. Bureau of Economic Analysis reported the gross domestic product dropped at an annual rate of 0.3% in the first quarter of 2025, the lowest level since 2022, driven by an increase in imports ahead of trade tariffs. In response to the data, the Federal Reserve Bank of Atlanta lowered its second quarter GPD growth estimate to 1.1%, down from 2.4%.
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The planned output hikes by some OPEC+ members are fanning global oversupply concerns given lackluster demand growth in China, amplified by the ongoing trade dispute, and robust non-OPEC production increases.
Production discipline has led to OPEC sitting on plenty of spare production capacity, some of which can immediately supply additional volumes to the market.
The U.S. Energy Information Administration in its April short-term energy outlook pegged OPEC spare production capacity at 4.59 million bpd in
March and 4.52 million bpd last month.
Separately, The Bureau of Labor Statistics on Friday morning reported total non-farm payroll employment rose by 177,000 in April, compared to 185,000 reported in February. The figure was above market expectations of an increase of 133,000.
The data show the unemployment rate at 4.2%, unchanged from March. The number of unemployed was 7.2 million, slightly up from the previous month. The unemployment rate has remained in a narrow range of 4.0% to 4.2% since May 2024.
The front-month NYMEX WTI futures contract for June delivery fell by $0.72 barrel (bbl) to $58.52 bbl while ICE Brent futures contract for July delivery dropped $0.57 bbl to $61.56 bbl.
June RBOB gasoline futures declined by $0.0247 to $2.0245 gallon, while the front-month ULSD futures contract slid $0.0142 to $1.9978 gallon.
The U.S. Dollar Index fell by 0.254 points to 99.80 against a basket of foreign currencies.
