Brent crude prices declined nearly 3% on Wednesday, rebounding slightly from a three-year low as U.S. crude stockpiles rose more than expected, adding pressure on oil markets already grappling with OPEC+ plans to increase production and fresh U.S. tariffs on Canada, Mexico, and China. By 12:59 p.m. EST (1759 GMT), Brent futures were down $1.82, or 2.6%, at $69.22 per barrel, while U.S. West Texas Intermediate (WTI) crude dropped $2.06, or 3%, to $66.20. Earlier in the session, Brent had touched $68.33, its lowest level since December 2021, while WTI crude fell to $65.22, its lowest since May 2023.
Prices recovered slightly after U.S. Commerce Department chief Howard Lutnick indicated that President Donald Trump would make the final call on potential relief for certain industries. Lutnick confirmed that the 25% tariff on Canada and Mexico would remain in place, though discussions were underway to potentially remove the 10% tariff on Canadian crude oil and gasoline imports that meet the U.S.-Mexico-Canada Agreement (USMCA) rules of origin.
A source familiar with the negotiations suggested this could ease some of the immediate concerns regarding North American trade flows. Adding to market pressures, U.S. crude inventories surged by 3.6 million barrels last week to 433.8 million barrels, according to the Energy Information Administration (EIA). This significantly exceeded analyst expectations of a 341,000-barrel increase, contributing to further declines in crude prices following the data release. Meanwhile, gasoline and distillate inventories fell, driven by increased exports.
Oil markets react to US tariffs on Canada, China, and Mexico
Market analysts linked the recent price drop to escalating trade tensions after Canada and China swiftly retaliated against Trump’s tariffs on Tuesday. Mexican President Claudia Sheinbaum also signaled that Mexico would respond, though details were not disclosed. Analysts at JP Morgan warned that a 100-basis-point slowdown in U.S. GDP growth could reduce global oil demand growth by approximately 180,000 barrels per day. On the supply front, OPEC+ announced its first output increase since 2022, opting to add 138,000 barrels per day starting in April.
The decision marks the initial phase of a gradual unwind of nearly 6 million barrels per day of prior production cuts, which represent about 6% of global demand. UBS analyst Giovanni Staunovo suggested that while the increase was modest, market concerns linger over whether OPEC+ will continue monthly supply additions. In a further blow to supply stability, the Trump administration announced the termination of a license that had allowed U.S. oil producer Chevron to operate in Venezuela and export crude since 2022.
ING analysts estimated that this move puts approximately 200,000 barrels per day of oil at risk. Despite ongoing uncertainties, JP Morgan analysts reported that global oil demand in February averaged 103.6 million barrels per day, marking a year-over-year increase of 1.6 million barrels per day. However, this figure fell short of the bank’s forecasted 1.8 million-barrel increase, reflecting broader market concerns over slowing economic growth and trade disruptions. – By MENA Newswire News Desk.