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(Bloomberg) -- Oil settled below $60 a barrel for the first time in three weeks as signs emerged that the Saudi-led OPEC+ alliance may be entering a prolonged period of higher production.
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West Texas Intermediate fell as much as 4.2% on Wednesday after Reuters reported that Saudi Arabian officials have been telling allies and industry experts that the kingdom can endure a sustained period of depressed prices. The most-active contract capped its biggest monthly decline since November 2021.
The report added to existing concerns that Saudi Arabia planned to steer OPEC+ to agree on another supply surge next week.
“This confirms the market’s fears that Saudi Arabia’s accelerated unwinds were not temporary, but a long-term strategy shift,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group. It raises the question of whether “Saudi is going to repeat the 2020 playbook to dramatically increase production.”
OPEC+ rocked the crude market in early April, with a surprise decision to increase supply in May by 411,000 barrels a day, the equivalent of three monthly tranches from a previous plan. Morgan Stanley has said it expects a “meaningful surplus” to develop over time, while JPMorgan Chase & Co. warned the cartel may accelerate planned production increases at a meeting next week.
Beyond OPEC+, non-cartel nations are also expected to add supplies, including drillers in Canada and Guyana, feeding concerns about a global glut.
At the same time, hopes are fading that there will be quick breakthroughs in US-led trade negotiations, weighing on the outlook for energy demand. The US economy contracted for the first time since 2022 in the first quarter as a result of a surge in pre-tariff imports and softer consumer spending. In China, factory activity slipped into the worst contraction since December 2023, revealing early damage from the trade war.
Trump said in remarks to ABC News that China deserved the steep tariffs he’d imposed on their exports. Hee said later Wednesday that he didn’t want China’s products unless the country is fair.
--With assistance from Yongchang Chin.
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