Oil Hits One-Year Low on Tariffs Fears, Rising Supply

Oil prices declined for the third consecutive day after U.S. crude oil stocks posted a larger-than-expected build, adding to worries about a looming return of more OPEC+ barrels to the market. Brent crude for May delivery fell 3.6% to $68.56 per barrel at 12.10 pm ET on Wednesday, the lowest level in more than a year, while WTI crude sunk 4.3% to change hands at $65.37 per barrel. U.S. crude stocks rose more than expected in the week ending February 28, while gasoline and distillate inventories fell, the Energy Information Administration reported. Crude inventories rose by 3.6 million barrels to 433.8 million barrels in the week, far exceeding analysts’ expectations for a 341,000-barrel increase.

“The imposition of tariffs on China, Canada and Mexico by the U.S. sparked swift reprisals from each nation that increased concerns over a slowdown in economic growth and the consequent impact on energy demand,” Ashley Kelty, an analyst at Panmure Liberum, said.

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A statement posted on OPEC’s website on Monday revealed that Saudi Arabia, Russia, the United Arab Emirates, Iraq, Kuwait, Kazakhstan, Oman and Algeria will start unwinding a 2.2 million barrel per day cut from April. The press release stressed that the return of oil “may be paused or reversed subject to market conditions’’.

“There is a bit of a concern in the market that the OPEC+ decision is the start of a series of more monthly supply additions, but the statement from OPEC+ reiterates an approach in bringing back barrels only if the market can absorb them,” UBS analyst Giovanni Staunovo said.

Last week, Standard Chartered predicted that the path of least resistance for oil prices is lower in the short-term. First off, market technicals have turned relatively bearish in the very short term. Second, most machine-learning or AI models have turned short-term bearish. Further, the annual London International Energy (IE) Week round of research, consultant and trader events appears to have accentuated the negative in terms of the oil market outlook. In previous years, the mood of the week has more often than not been self-reinforcing.

By Alex Kimani for Oilprice.com

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