HOUSTON: Oil prices eased slightly in choppy trade on Thursday with Brent still below $70 under pressure from trade tariffs between the US, Canada, Mexico and China, and OPEC+ plans to raise output.
Those factors and a larger than expected build in US crude inventories had sent Brent as low as $68.33 on Wednesday, its weakest since December 2021. Brent futures were down 29 cents, or 0.4%, at $69.03 a barrel by 11:10 a.m. ET (1610 GMT) on Thursday while US West Texas Intermediate crude futures eased 37 cents, or 0.6%, to $65.90. “The OPEC news of adding barrels next month, along with a Russian/Ukraine peace deal now looking more promising and a flip/flop of tariffs is keeping crude in a volatile trade,” said Dennis Kissler, senior vice president of trading at BOK Financial.
Prices had fallen after the US enacted tariffs on Canadian and Mexican goods, including energy imports, at the same time major producers decided to raise output quotas for the first time since 2022.
Oil recovered and stabilised somewhat after the US said it will make automakers exempt from the 25% tariffs. A source familiar with the discussions said that US President Donald Trump could eliminate the 10% tariff on Canadian energy imports, such as crude oil and gasoline, that comply with existing trade agreements. Downside risks on demand will likely be greater than supply side risks at this point with the additional oil coming from OPEC, said Scott Shelton, energy analyst at TP ICAP.
“Spare capacity can offset supply losses, but there is no way to fix demand, which should flounder under the weight of sanctions and under perform,” Shelton added.
The OPEC+ producer group, comprising the Organization of the Petroleum Exporting Countries and allies including Russia, decided on Monday to increase output for the first time since 2022.
One OPEC+ delegate, commenting on the market’s reaction to Monday’s decision, said the price drop looked overdone and hoped that the market was now on a “gradual recovery”.
The retreat in prices after Monday’s news was then exacerbated on Wednesday by a rise in US crude inventories, said ANZ’s Hynes. Crude stockpiles in the US, the world’s biggest oil consumer, rose more than expected last week, buoyed by seasonal refinery maintenance, while gasoline and distillate inventories fell because of a hike in exports, the Energy Information Administration said on Wednesday. Tariffs also remain in effect on US imports of Mexican crude, a smaller supply stream than Canadian crude but an important one for US refineries on the Gulf Coast.
Meanwhile, Chinese officials have flagged that more stimulus is possible if economic growth slows, seeking to support consumption and cushion the impact of an escalating trade war with the US.
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