US job growth hasn’t been this slow since Covid. Trump’s policies could chill it further

China–U.S. Trade War

Economic

Summary:

U.S. job growth is slowing to post-Covid lows amid rising uncertainty. Trump's tariffs, spending cuts، and hiring freezes risk weakening labor markets further, with layoffs increasing and wage growth softening.

It all comes down to the job market.

President Donald Trump’s drastic policy moves, and the twists and turns that have come alongside them, have made economic forecasting a squirrely endeavor.

The sheer uncertainty of what’s to come has put markets on the fritz and sent soft data (like consumer sentiment surveys) sounding alarms. Now, the hard data (tried-and-true economic metrics that are lagged for good reason) is starting to reflect some of the disarray.

A tumultuous tariff program and trade war have sent recession odds higher.

“Let’s not fool ourselves, things are going to get worse later this year, probably later in the summer,” Robert Frick, corporate economist at Navy Federal Credit Union, told CNN in an interview. “But for now, we really need to cross our fingers and hope that incomes and jobs hold up, because those are the things that will insulate us.”

The engine of the US economy is the American consumer, whose spending accounts for more than two-thirds of economic activity. And the lifeblood of consumer spending comes from one critical source: the US labor market.

And as it stands now, and as it likely stood in April, that fuel source hasn’t run dry — but it very well could be starting to crack under the pressure.

“The economy appears strong in the data … job growth is continuing, the unemployment rate is at a fine level; there are no warning signs there, but I think what the data doesn’t show is that the risks have increased,” Elizabeth Renter, senior economist at NerdWallet, told CNN in an interview this week. “There’s a whole lot going on, and there are a lot more and greater risks to the labor market and to the broader economy now than there were, say, three months ago.”

On Friday morning, the Bureau of Labor Statistics will release the jobs report for April, and it’s expected that the US economy added 135,000 jobs and that the unemployment rate stood pat at 4.2%, according to FactSet consensus economists estimates.

Headwinds are growing stronger

If April’s estimates hold true, they’d mark a significant retreat from March, where preliminary estimates showed a stronger-than-anticipated net gain of 228,000 jobs. Economists expect that prior 228,000 estimate to be revised down come Friday now that more complete information is available (after all, March’s report included a downward revision of 48,000 jobs to January and February combined).

Through March, employment growth has averaged 152,000 jobs per month. That’s the slowest first-quarter growth since 2020 (when a massive 14 million jobs were lost that March) and, before the pandemic, since 2011, BLS data shows.

“The headwinds that we were looking at before the March report are still there and almost certainly stronger now,” Dean Baker, senior economist and co-founder of the Center for Economic Policy Research, wrote in a note issued earlier this week.

Tariffs were partly in place in March: It was the second month that initial tariffs on Chinese goods were in effect (20%); plus, the global 25% tariffs on steel and aluminum imports took effect March 12. Additionally, the Trump administration placed a hiring freeze on the federal workforce, slashed jobs across agencies and canceled massive amounts of grants and contracts.

“This has not led to any substantial uptick in unemployment claims, but surveys of both businesses and consumers have turned sharply negative in the last two months,” Baker noted. “It is hard to believe that this has not had some impact on hiring.”

Now businesses have to contend with plenty more unknowns.

In April, the tariff headwinds grew stronger as Trump ramped up duties on Chinese imports to 145%; placed a 10% baseline tariff on all imported goods; applied a 25% tariff on cars; and imposed — then delayed — additional, and varying “reciprocal” duties on dozens of countries.

Beyond tariffs, the federal spending cuts have continued, as have deportations and other anti-immigration actions.

The latest labor turnover data released earlier this week showed that some employers are retrenching. In March, job openings sank to their lowest level since September, a time when pre-election uncertainty helped to dampen hiring plans.

Some economists expect those “holding patterns” to become even more evident in the jobs data when it’s released Friday. Lydia Boussour, senior economist at EY-Parthenon, estimates that April’s job growth could be a paltry 65,000.

“Since the March jobs report, timely indicators such as initial jobless claims have not suggested a material surge in layoffs, but job cut announcements released by Challenger, Gray & Christmas indicate that layoffs are creeping higher as employers grow increasingly cautious about the outlook,” she wrote in a note to clients. “Business surveys also point to deteriorating labor market trends.”

The downside risks only grew in April, she added.

“The payroll survey for the jobs report was conducted the week after the April 2 reciprocal tariff announcement, when uncertainty and volatility were extremely high, which could have weighted on hiring decisions,” she wrote. “Moreover, April is a month when seasonal factors are substantially negative, especially in services industries.”

The seasonal adjustment calculations meant to counterbalance the spikes in springtime hiring could very well serve as a drag on Friday’s numbers if seasonal hiring this April was depressed due to uncertainty around tariffs, she added.

The DOGE effect

Though the ripple effects from tariffs and immigration-related activities could take longer to show up in the data, the federal workforce reductions already have started appearing. The sector posted job losses for two consecutive months, dropping 11,000 jobs in February and 4,000 jobs in March, BLS data shows.

More losses are expected, but could be spread over many months to come: While nearly 300,000 job cuts have been announced, not all federal workers were laid off immediately, so the impact to the labor market and unemployment is going to be a slow drip.

Job cuts by the government represented the largest chunk of layoffs so far this year, up 680% from the same period last year. Department of Government Efficiency-related cost-cutting led to a total of 281,452 layoffs, according to new data released Thursday by Challenger, Gray & Christmas.

For the month of April, US-based employers announced plans to cut 105,441 jobs, according to the Challenger report. That’s significantly higher than the 64,789 job cuts announced last April. However, a large chunk (40,000 jobs) of last month’s layoff count can be attributed to plans tied to two major employers: UPS and Intel.

Earlier this week, UPS said it plans to cut 20,000 jobs this year as part of a previously announced plan to increase automation and trim its Amazon business. Last week, Bloomberg reported that Intel was expected to cut 20,000 workers; however, the company has not announced specific details for potential upcoming layoffs.

Cutting through the noise, there is a clear trend of economic uncertainty weighing on businesses, noted Andrew Challenger, senior vice president for the outplacement and business coaching firm.

“Though the government cuts are front and center, we saw job cuts across sectors last month,” he said in a statement. “Generally, companies are citing the economy and new technology. Employers are slow to hire and limiting hiring plans as they wait and see what will happen with trade, supply chain, and consumer spending.”

Weekly jobless claims, which are considered a proxy for layoffs, remain near pre-pandemic levels and below historic averages —despite surging uncertainty and rising numbers of layoff announcements. The initial claims data, although highly volatile and subject to revision, has risen in importance as a potential indicator for how Trump’s sweeping actions — including mass layoffs of federal government workers — are filtering through the economy.

Last week, the number of first-time claims jumped to their highest level since late-February. There were 241,000 initial claims for unemployment insurance filed during the week ended April 26, according to Labor Department data released Thursday. That total is up 18,000 from the week before.

Thursday’s report also showed that people continue to stay unemployed for longer: The number of continuing claims, which are filed by Americans who have received at least a week or more of jobless benefits, climbed by 83,000 to 1.916 million, the highest level since November 2021.

Areas and metrics to watch in Friday’s report

Health care, state and local government, leisure and hospitality: These three sectors have been the leading drivers of overall job growth in recent years. Health care should continue to lead in job gains; however, the pace is expected to slow.

A downswing in state and local government hiring could be an indication of the negative ripple effects from federal spending reductions; at the same time, states and municipalities have sought out laid-off federal workers for empty roles.

“State and local government is the place where you often have safety net measures in place; so if we do go into a recession, seeing how well they’re holding up in terms of employment is also useful,” said Elise Gould, senior economist at the Economic Policy Institute.

In addition to the seasonal adjustment effects economist Boussour noted, slow job gains or losses in leisure and hospitality could also reflect a pullback in discretionary spending among rattled consumers.

Hours worked: If the average workweek dips lower, that could be a warning signal of what could come, Gould told CNN.

“Are people getting fewer hours? Are the shifts being reduced?” she said. “They’re not letting go workers, necessarily, but maybe they’re lowering [employees] hours of work.”

Wage growth: The annual rate of average hourly earnings dipped to 3.8% in March from 4% in February. With more workers uncertain about their future job prospects and the overall economy, they’re staying put — and less job-hopping means wage gains could continue to soften at a time when tariffs could cause prices to rise.

Wage gains have normalized after a post-pandemic spike; and while the stability is in line with what the Federal Reserve hopes to see (as inflation cools), the policy climate is far different — and far more unstable — than anticipated. New data released this week showed that US workers’ pay and benefits grew at their slowest pace in nearly four years during the first-quarter period when policy-related uncertainty started to weigh on hiring plans, according to new data released Wednesday.

Unemployment for Black workers: “The Trump administration has made clear that it intends to reverse all efforts at encouraging the hiring of Black workers and other minorities — not just in the federal government but in the private sector as well,” CEPR’s Baker noted. “This will almost certainly dim their employment prospects.”

In March, the employment to population ratio for Black workers dropped to 58.4%, the lowest since August 2022. Monthly data is highly volatile, especially for specific metrics such as this.

Construction and manufacturing: Construction has been a steady source of job growth; however, a dampening of demand coupled with rising input costs could cause that growth to falter.

The same could be true for manufacturers, who could feel the pinch from costlier goods imported from abroad, said Noah Yosif, chief economist at the American Staffing Agency.

Source: cnn

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Adam

Stocks

Stocks rose on Thursday after strong quarterly results from two Big Tech players eased concerns that artificial intelligence progress would slow amid economic turmoil.

The Dow Jones Industrial Average climbed 210 points, or 0.5%. The S&P 500 traded up about 1%, while the Nasdaq Composite increased nearly 2%.

Investor fears that President Donald Trump’s tariffs and a downturn in the U.S. economy would threaten the AI trade were assuaged after Meta Platforms posted stronger-than-expected revenue in the first quarter, with Meta’s Chief Executive Mark Zuckerberg saying on an earnings call Wednesday that the business is “performing very well” and that it’s “well positioned to navigate the macroeconomic uncertainty.”

Microsoft also reported top- and bottom-line beats in the fiscal third quarter as well as strong results from its Azure cloud business. On top of that, the company offered upbeat guidance, further alleviating some concerns about tech companies’ future performance. The company’s executives said during an earnings call Wednesday that they expect capital expenditures to gain from here as they continue to expand data center capacity, adding that “cloud and AI are the essential inputs for every business to expand output, reduce costs and accelerate growth.”

Those results sent shares up 9%, while Meta shares advanced about 6%. Other names like AI chip darling Nvidia also moved higher by 4%, and information technology outpaced the rest of the S&P 500 sectors, seeing a 3% incline.

“Few stocks are truly immune to Trump tariffs [and] trade war, but AI is a lot less impacted than investors currently believe,” said Jed Ellerbroek, portfolio manager at Argent Capital Management. “We’re early in a very steep growth curve right now, and that goes for AI infrastructure.”

Denting Thursday’s bullishness somewhat was a jump in weekly jobless claims to 241,000, more than the the Dow Jones estimate of 225,000. That jump exacerbated further concerns about the economy after the weak first-quarter gross-domestic-product report earlier in the week and raises the stakes for April’s nonfarm payrolls reading on Friday.

In the previous session on Wednesday, the S&P 500 and the 30-stock Dow posted gains in volatile trading, coming back from earlier losses. At the day’s lows, the broad market index was down more than 2%, while the blue-chip Dow lost more than 780 points.

Traders were initially shaken by weak economic data from the Commerce Department, showing that GDP fell at an annualized pace of 0.3%. It marked the first quarter of negative growth since Q1 of 2022. Economists polled by Dow Jones had forecast a 0.4% gain. Investors looked past the dismal results and began buying back into the market late in the session, resulting in a rebound into positive territory for the Dow and S&P 500.

Wednesday marked the final trading day in April, in which stocks were first whipsawed after President Donald Trump’s “reciprocal” tariff announcement on April 2 and the subsequent suspension of the highest levies. At one point, during the month, the S&P 500 briefly slipped into a bear market – falling more than 20% from its February record high – before recapturing some of its losses. The broad market index wound up ending Wednesday about 9% off its record close.

Still, the comeback couldn’t save S&P 500 and the Dow from a losing April, as they slipped about 0.8% and 3.2%, respectively. The Nasdaq Composite, however, advanced 0.9% in the period.

Source : cnbc

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Grace Montgomery

Stocks

Wall Street's main indexes advanced on Thursday, led by gains on the tech-heavy Nasdaq, as strong quarterly results from heavyweights Microsoft and Meta pointed to a resilient outlook for the technology sector.

Microsoft (MSFT.O), surged 8.8%, hitting its highest level since late January, after it forecast stronger-than-expected quarterly growth for its cloud-computing business Azure. The gains helped the stock surpass Apple (AAPL.O), to became the world's most valuable company.

Meta Platforms (META.O), gained 4.7% after posting higher-than-expected revenue on the back of a strong advertising performance.

"Their (Meta and Microsoft's) outlooks weren't as bleak as some of the tech companies that we've heard from of late ... momentum coming into the day after a late-day rally yesterday combined with better news on two of the Mag Seven names, (and) you've got the potential set-up for a pretty good start to a new month," said Art Hogan, chief market strategist at B Riley Wealth.

The strong results helped calm jitters over an increasingly uncertain outlook for businesses caused by erratic shifts in U.S. tariff policy and an escalating trade war with China.

Other technology megacaps also rose, with Nvidia (NVDA.O), up 3.8%.

The information technology (.SPLRCT), and communication services (.SPLRCL), sectors rose 2.6% and 1.2%, respectively.

At 10:01 a.m. ET, the Dow Jones Industrial Average (.DJI), rose 189.96 points, or 0.47%, to 40,859.32, the S&P 500 (.SPX), gained 42.73 points, or 0.82%, to 5,614.85 and the Nasdaq Composite (.IXIC), gained 262.71 points, or 1.51%, to 17,709.06.

The Nasdaq was trading at levels last seen on March 28 and was on track to recoup all declines since the April 2 announcement of reciprocal tariffs.

Results from megacaps Amazon.com (AMZN.O), and Apple are due after markets close. Amazon shares were up 2%, while Apple slipped 1% after a federal judge ruled the iPhone maker had violated a U.S. court order to reform its App Store.

Meanwhile, weekly jobless claims data, coming ahead of Friday's nonfarm payrolls data, showed layoffs increased more than expected last week, potentially hinting at a pick-up in job cuts following tariffs.

"It's hard to hide from the number of jobs - either jobless claims or number of jobs being created - so this may well be the week where some of the hard data starts to catch up with some of the soft data," Hogan said.

The Institute for Supply Management's (ISM) gauge of manufacturing activity came in at 48.7 for April, above estimates of 48, according to economists polled by Reuters.

That followed Wednesday's data showing the U.S. economy contracted for the first time in three years in the last quarter.

Among other earnings, Eli Lilly (LLY.N), lost 8.2% after its quarterly results, while McDonald's (MCD.N), dipped 1.4% after posting a surprise drop in first-quarter global sales.

Mobile chip designer Qualcomm (QCOM.O), fell 7.6% after it forecast a hit to revenue from the trade war. CVS Health (CVS.N), surged 7.7% after its results.

General Motors (GM.N), gained 1.2% after offering a new forecast for 2025 core profit.

Advancing issues outnumbered decliners by a 1.94-to-1 ratio on the NYSE and by a 1.26-to-1 ratio on the Nasdaq.

The S&P 500 posted 6 new 52-week highs and 2 new lows while the Nasdaq Composite recorded 25 new highs and 32 new lows.

Source: Kitco

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Adam

Stocks

On May 1, 2025, the Institute for Supply Management released ISM Manufacturing PMI report for April. The report indicated that ISM Manufacturing PMI decreased from 49 in March to 48.7 in April, compared to analyst forecast of 48. Numbers below 50 show contraction.

New Orders Index increased from 45.2 in March to 47.2 in April, while Production Index declined from 48.3 to 44.0.

The report indicated that tariffs remained the key factor for businesses. It’s not surprising to see that ISM Manufacturing PMI is in the contraction territory as businesses are cautious in the current environment.

U.S. Dollar Index moved above the psychologically important 100.00 level as traders reacted to the better-than-expected ISM Manufacturing PMI report. From a big picture point of view, the American currency continues to rebound from yearly lows.

Gold settled near the $3225 level after the release of the report. Gold remains under material pressure as demand for safe-haven assets declines.

SP500 made an attempt to settle above the 5630 level as traders reacted to the report. Stock traders stay bullish amid reports indicating that the U.S. has reached progress in trade negotiations. Trade wars will remain the key catalyst for SP500 in the near term.

Source: fxempire

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Thomas

Economic

Commodity

Rodríguez, who also runs Venezuela’s energy ministry, met with Chinese Vice President Han Zheng and China National Petroleum Corp. Chairman Dai Houliang in Beijing on Thursday and Friday of last week, according to Chinese state media. During the meetings, Rodríguez asked China to increase oil purchases and help provide the diluent and light crude needed to process and export Venezuela’s tar-like oil, according to people briefed on the matter.

China, Venezuela’s biggest creditor, is seeking to renegotiate terms on its contracts, requesting an even steeper discount on oil purchases, some of the people said.

Venezuela is in an increasingly vulnerable position as US President Donald Trump targets the oil that serves as major source of government revenue, part of his effort to ratchet up pressure on Nicolas Maduro’s regime.

Trump, who considers Maduro an “extraordinary threat” to US national security, has imposed tariffs on countries that import oil from the South American nation, making negotiations with allies like China even more sensitive. He has also revoked licenses for foreign energy companies operating there, including Chevron, Repsol SA, Eni SpA, and Maurel & Prom.

Press officials for Venezuela’s presidency and PDVSA didn’t respond to requests for comment on the visit. The Ministry of Foreign Affairs in Beijing did not respond to a request for comment on each side’s demands. China is currently on its annual May Day public holidays.

To avoid exposure, at least four zombie vessels — ships that take on the identities of scrapped tankers to appear legitimate and avoid scrutiny from authorities in the US and elsewhere — have sailed off of the José and Amuay oil export terminals in Venezuela in recent weeks, according to ship-tracking data provided by Starboard Maritime Intelligence and analyzed by Bloomberg.

Asia’s largest economy was already the No. 1 buyer of Venezuelan oil last month, with 10 tankers taking an average of 461,000 barrels per day to processors, according to US Customs and shipping data.

About 5% to 10% of those exports already go toward paying down debt, according to people familiar with the matter. Public data supports estimates that Beijing lent upwards of $60 billion in oil-backed loans to Venezuela through state-run banks until 2015, reaching a level of diplomatic and financial investment unmatched elsewhere in Latin America and perhaps the world.

China became a key lender to Venezuela in 2007, when it first provided funds for infrastructure and oil projects under late President Hugo Chávez.

“We’re reaching a new level with the agreements we’re going to sign, some of which were already signed there,” Rodríguez said in televised broadcast alongside Maduro on Monday. “That’s a reserved agenda that we can’t mention, it’s confidential.”

“I can tell you that we’re really extremely happy with this Chinese tour, to be able to reaffirm our friendship, carry your message and present a new concrete work agenda,” she added.

Trump’s pick to take the lead on US sanctions strategy warned of “consequences” for any nation that imports Venezuelan oil, signaling potential repercussions for China.

“President Trump is sending a clear message that access to our economy is a privilege, not a right,” John Hurley recently wrote in response to questions from a Senate committee. “Countries importing Venezuelan oil will face consequences.”

The US State Department didn’t immediately respond to requests for comment on whether it’s evaluating imposing secondary tariffs on China for this reason.

Venezuela’s economy is already feeling the consequences of US maximum pressure policy, with the currency crashing to record lows on expectations that a massive shortage of dollars will lead companies and individuals to rush to the black market to buy greenbacks. The fallout threatens to stoke inflation and undo the economic stabilization the Maduro government has found, in part, by allowing wide use of the dollar.

The tariffs couldn’t have come at a worse time for the country. With surveys from the opposition-led Observatorio de Finanzas predicting the economy will contract this year for the first time since 2020 and the central bank’s liquid reserves drying up, oil revenue is essential to supply dollars to the official market.

CNPC, once a key producer in Venezuela’s Orinoco belt, has seen at its Sinovensa joint venture dwindle to 103,000 barrels a day on April 1, according to PDVSA data seen by Bloomberg. Production is still below historic levels of 160,000 barrels a day in 2015.

Source: Bloomberg Europe

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Gerik

China–U.S. Trade War

EU Reconfigures Rare Earth Supply Chains Amid Geopolitical Tensions

The global rare earth supply chain is undergoing a strategic realignment as the European Union (EU) accelerates efforts to diversify away from Russian resources and leans further into China as a critical supplier. Triggered by President Donald Trump’s unpredictable trade policies and escalating tariff threats, Brussels is recalibrating its industrial sourcing to reduce strategic vulnerabilities—marking one of the most significant shifts in EU trade behavior since the post–World War II era.

Recent export restrictions by China on seven types of rare earth elements bound for the U.S. have created a vacuum that the EU is now actively filling. While the U.S. remains highly dependent on Chinese rare earths for its defense and tech industries, the EU sees an opportunity to deepen commercial ties with China—despite ongoing strategic mistrust—leveraging the situation to strengthen its raw material security.

China’s Dominance and U.S.-EU Divergence

China currently dominates approximately 98% of global rare earth processing, granting it extraordinary leverage in global supply chains. By restricting exports to the U.S., Beijing not only deepens the fragility of American access to critical minerals but also opens up room for expanded trade flows with other global actors, notably the EU.

Historically aligned with Washington on trade and security, the EU is now demonstrating an increasing willingness to break with the U.S. under the Trump administration’s isolationist policies. Brussels appears to be hedging against growing unpredictability in U.S. foreign policy by seeking more autonomous supply arrangements, even if that means relying more heavily on Beijing.

Strategic Numbers Reveal Shifting Supply Trends

The EU’s import patterns from 2020 to 2024 reveal a clear strategic pivot:

In 2020, the EU imported 10,700 tonnes of rare earths worth €72.3 million. Russia accounted for over half the value (50+%), with China at 43%.

By 2021, total imports rose to 16,900 tonnes (€106.5 million). Russia’s share dropped to 27.2%, China held 35.5%, and alternative suppliers expanded.

In 2022, imports surged to 18,400 tonnes (€145.7 million). China’s share increased to 40.2%, while Russia declined to 24.5%.

In 2024, imports decreased slightly to 12,900 tonnes (€101.5 million), but China’s dominance grew to 46.5%. Russia recovered modestly to 28.7%, and other countries—including the U.S., Malaysia, and Australia—collectively held a 24.8% share.

These figures underscore a pronounced shift: China is regaining ground as Europe’s top supplier, while Russia’s relevance continues to wane due to geopolitical fallout from the Ukraine conflict and energy sanctions.

Geopolitical Pressures Create Asymmetric Dependence

Although the EU remains cautious of Beijing’s strategic ambitions, it views the diversification of supply chains as essential to ensuring both economic resilience and industrial competitiveness. The European Commission has repeatedly warned against overdependence on any single source—citing not only Russia but implicitly also the United States.

With strategic materials forming the backbone of the EU’s green and digital transitions, the bloc’s new industrial policy has placed rare earths, battery metals, and semiconductors at the core of economic security. As a result, reducing vulnerability to geopolitical shocks is now guiding material sourcing decisions more than traditional alliance frameworks.

The EU’s deepening engagement with China in rare earth trade reflects a larger geopolitical recalibration driven by the twin forces of U.S. policy volatility and Russian isolation. While Brussels still walks a diplomatic tightrope between Western alignment and pragmatic trade, the rare earth sector illustrates a growing willingness to prioritize strategic autonomy—even if it means turning to China. This dynamic underscores a broader trend: in today’s fragmented world, material security is increasingly superseding political loyalty.

Source: Bne Intellinews

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Gerik

Commodity

Oil Declines as Demand Outlook Deteriorates

Oil markets extended losses into Thursday, reflecting a combination of bearish signals from both demand and supply sides. Brent crude futures dropped by 59 cents, or 1%, to $60.47 per barrel, while U.S. West Texas Intermediate (WTI) crude slid 65 cents, or 1.1%, to $57.56. This decline builds on the previous session’s sharp sell-off, driven by renewed macroeconomic headwinds and expectations of looser OPEC+ production restraint.

UBS analyst Giovanni Staunovo emphasized that "the oil market remains concerned about weakening oil demand growth over the coming months," citing persistent trade tensions and speculation that the OPEC+ alliance may unwind supply cuts more aggressively.

U.S. Contraction Amplifies Demand Fears

One of the key contributors to the bearish tone in energy markets was the first-quarter contraction of the U.S. economy—the first such occurrence in three years. The decline, driven by a surge in imports as firms rushed to front-run President Trump’s escalating tariff regime, casts doubt on the strength of energy demand in the world's largest oil-consuming nation.

This contraction not only signals potential weakening in domestic consumption but also reinforces concerns that U.S. policy volatility is disrupting global trade flows. According to a Reuters poll, the combination of tariffs and macroeconomic instability now raises the risk of a broader global recession in 2025, adding another layer of downside risk for oil prices.

Saudi Arabia and OPEC+ Rethink Supply Discipline

On the supply front, fresh signals from OPEC+ have added to market jitters. Reuters sources indicated that Saudi Arabia, the bloc’s de facto leader, is prepared to tolerate lower oil prices for an extended period and is less willing to unilaterally support the market through deeper production cuts. This strategic stance represents a shift from previous periods where Riyadh took the lead in stabilizing prices.

Moreover, three insiders familiar with OPEC+ deliberations revealed that several member countries are likely to push for accelerated output increases at the alliance's upcoming meeting on May 5. If approved, June could mark the second straight month of rising supply, adding further pressure to a market already worried about fragile demand.

Physical Demand Still Strong but Insufficient

Despite the negative macro signals, U.S. crude inventories declined by 2.7 million barrels last week, beating expectations of a 429,000-barrel build. The drawdown was driven by robust export flows and increased refinery activity. However, this temporary support for prices is not expected to offset the weight of larger structural concerns about slowing demand growth.

Analytics firm Kpler, for example, has cut its 2025 global oil demand growth forecast to 640,000 barrels per day (bpd), down from 800,000 bpd. The firm cited the prolonged U.S.-China trade war and weak demand from India—two key growth engines for global energy consumption.

Bearish Bias Dominates Near-Term Sentiment

With weakening growth signals from the U.S., potential oversupply from OPEC+, and heightened uncertainty due to erratic trade policy, oil markets appear poised for a period of volatility and downward pressure. Analysts note that unless demand shows a stronger-than-expected recovery or OPEC+ takes a more coordinated and disciplined approach, crude benchmarks may struggle to find sustained support in the near term.

Ehsan Khoman of MUFG summarized the sentiment by stating, "The U.S. administration’s volatile tariff policy strategy... has made traders nervous about loosening fundamentals," highlighting the interconnected nature of trade, economic confidence, and energy pricing.

The convergence of softer U.S. economic data, strategic shifts within OPEC+, and rising geopolitical uncertainty has created a highly unstable environment for oil prices. While strong refinery demand and short-term inventory drawdowns offer temporary support, the broader structural forces point to growing downside risks. Market participants now await the May 5 OPEC+ meeting and upcoming U.S. labor data to gauge whether the current downtrend will deepen or find reprieve.