Oil drops $2 after US crude stock build, OPEC+ output increase, Trump tariffs

HOUSTON: Oil prices declined for a third day on Wednesday after US crude oil stocks posted a larger-than-expected build, adding a further headwind as investors worried about OPEC+ plans to proceed with output increases in April, and US President Donald Trump’s tariffs on Canada, China and Mexico escalated trade tensions.

Brent futures fell $2.19, or 3.1%, to $68.85 a barrel by 10:49 a.m. EST (1549 GMT). US West Texas Intermediate (WTI) crude declined $2.55, or 3.7%, to $65.71 a barrel.

US crude stocks rose more than expected, while gasoline and distillate inventories fell in the week ending February 28, the Energy Information Administration said.

Crude inventories rose by 3.6 million barrels to 433.8 million barrels in the week, the EIA said, far exceeding analysts’ expectations in a Reuters poll for a 341,000-barrel rise.

Brent crude futures fell more than $2 a barrel after the data.

Oil down on OPEC+ output increase, tariffs start and US pause on Ukraine aid

On Tuesday, both crude benchmarks had settled near multi-month lows, as investors braced for tariffs and counter-tariffs to slow economic growth and reduce fuel demand.

“The imposition of tariffs on China, Canada and Mexico by the US 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.

Canada and China retaliated immediately to Trump’s tariffs on Tuesday, and Mexican President Claudia Sheinbaum said the country would respond, without giving details.

OPEC+, the Organization of the Petroleum Exporting Countries and allies including Russia, decided on Monday to increase output for the first time since 2022, pressuring crude prices.

The group will make a small increase of 138,000 barrels per day from April, the first step in planned monthly increases to unwind its nearly 6 million bpd of cuts, equal to almost 6% of global demand.

“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.

Analysts at Morgan Stanley Research said it was possible OPEC+ would deliver only a few monthly increases, rather than fully unwind the cuts.

The Trump administration also said on Tuesday it was ending a licence that Washington granted to US oil producer Chevron since 2022 to operate in Venezuela and export its oil.

The decision puts 200,000 bpd of supply at risk, ING commodities strategists wrote in a note on Wednesday.