A bleak message for global economy

Global oil prices have been falling for several consecutive sessions in recent weeks and continued to decline by around 2% in the final days of April. This downward trend signals weakening global economic health amid escalating trade tensions.

An oil rig in Texas, the US

The price of the North Sea Brent crude oil fell by 1.61 USD (2.4%), settling at 64.25 USD per barrel in the final days of April. The price of US WTI crude dropped 1.63 USD (2.6%), down to USD 60.42 per barrel, the lowest closing price since April 10. Analysts and international institutions predict that oil prices could decline further as the Organisation of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, are expected to increase production. Global demand is unlikely to rise due to US President Donald Trump's tariff policies.

Despite falling oil prices, some OPEC+ members are expected to propose a further production increase in June, marking the second consecutive monthly rise. In fact, in the first quarter of this year, Kazakhstan, an OPEC+ member, boosted oil exports by 7% year-on-year, thanks to increased output via the Caspian oil pipeline.

International organisations and analysts believe that rising production, combined with the risk of a global economic recession this year, are the two main drivers behind the sharp decline in oil prices. This has severely eroded profits for many oil and gas producers. BP, the British oil giant, reported a larger-than-expected drop in net profit for the first quarter of this year, down 48% to 1.4 billion USD, due to weak performance in its refining and gas trading segments.

According to Reuters, most analysts have sharply lowered their forecasts for oil demand and prices this year. China, the country facing the highest US tariffs, retaliated with its levies on US goods, escalating the trade tension between the world's two biggest oil consumers. As both economic powerhouses, the US and China, weaken under the trade tension, the global growth outlook becomes increasingly grim.

At the end of April, the International Monetary Fund (IMF), in its World Economic Outlook, projected global GDP growth of only 2.8% this year, 0.5% points lower than its January forecast.

For 2026, global GDP growth is forecast to reach 3%, down 0.3%. The IMF also downgraded its US GDP growth forecast to 1.8% for this year, a 0.9% point drop from its January projection, and expects it to decline further to 1.7% in 2026. The international financial institution stressed that these forecasts are driven by rising policy uncertainty and escalating trade tensions, which are weakening global demand.

The weakening of the global economy has made analysts pessimistic about the outlook for oil prices.

Speaking to The National News at the end of April, Fatih Birol, Executive Director of the International Energy Agency (IEA), warned that oil prices would continue to fall. They may come under further pressure due to the uncertainties of the trade tensions. If the current trajectory continues, global oil demand would be negatively affected.

Meanwhile, under its baseline economic forecast for 2025, the Russian Ministry of Economic Development estimates average Brent oil prices at 68 USD per barrel, a sharp drop from the 81.7 USD per barrel in its September 2024 forecast. It also forecasts the price of Urals crude, Russia’s key export blend, at 56 USD per barrel, lower than the 69.7 USD assumed in Russia’s 2025 budget.

Earlier, the Russian central bank had warned that oil prices could remain below forecasts for several years due to declining global demand.

The sharp decline in oil prices is not only a “bleak signal” for the global economy but also risks reducing investment in oil exploration and production, which could destabilise future oil supply. IEA’s Executive Director Fatih Birol further cautioned that rising geopolitical tensions are becoming a growing threat to energy security, and the world now faces major challenges in terms of oil, gas, and critical mineral supplies.

In the current context of increasing geopolitical fragmentation, the international community must find common ground to address these challenges, stabilise oil prices, and support global economic growth. History has shown that no single country can resolve energy crises or trade wars alone, and conflicts between nations have always been a drag on the global economy.

NDO