- Market Recovers Slightly Following Four-Day Drop Amid Trade Uncertainty and OPEC+ Output Plans
Oil prices steadied on Thursday after suffering a sharp decline over the past four trading sessions. Investors responded cautiously to signs that the U.S. may ease tariffs on Canadian crude supplies, while remaining wary of ongoing trade tensions with Mexico and an expected rise in global oil production.
Brent crude futures gained 42 cents, or 0.61%, to trade at $69.72 per barrel by 0144 GMT, while U.S. West Texas Intermediate (WTI) crude climbed 40 cents, or 0.6%, to $66.71 per barrel.
The modest rebound comes after a significant drop earlier in the week. Brent crude had plunged 6.5% over four sessions, reaching its lowest level since December 2021 on Wednesday. WTI followed suit, losing 5.8%, marking its weakest level since May 2023.
The sharp decline in oil prices was largely driven by new tariffs imposed by the U.S. on imports from Canada and Mexico, including energy products such as crude oil and gasoline. However, the U.S. administration signaled a possible retreat from some of these measures, providing some relief to the market.
According to sources familiar with the matter, President Donald Trump is considering eliminating the 10% tariff on Canadian energy imports that comply with existing trade agreements. The White House also announced an exemption for automakers from the 25% tariffs, raising hopes that other sectors could also see some relief.
“Trump’s trade measures are threatening to reduce global energy demand and disrupt trade flows in the global oil market. This was exacerbated by a rise in U.S. inventory,” said Daniel Hynes, senior commodity strategist at ANZ, in a note on Thursday.
While the possible relaxation of Canadian oil tariffs provided a short-term boost to prices, tariffs on Mexican crude oil imports remain in place. This continued restriction is causing supply chain disruptions for U.S. Gulf Coast refiners, which rely on Mexican crude as a key feedstock.
Adding to market jitters is the decision by OPEC+ (the Organization of the Petroleum Exporting Countries and its allies, including Russia) to raise production quotas for the first time since 2022. The move signals that major producers are confident in their ability to absorb market shifts caused by trade policy changes and fluctuating demand.
OPEC+ has maintained strict supply curbs in recent years to support prices, but the latest increase in output could pressure oil markets further if demand fails to keep up.
Analysts fear that rising global oil inventories, combined with trade disruptions, could push prices lower in the coming months.
Another factor contributing to price weakness is the surge in U.S. crude stockpiles. According to the Energy Information Administration (EIA), U.S. crude inventories rose by 3.6 million barrels last week, bringing total stocks to 433.8 million barrels. This increase far exceeded analysts’ expectations of a modest 341,000-barrel rise.
The inventory buildup reflects a combination of seasonal refinery maintenance and weaker domestic demand. Gasoline and distillate inventories, however, declined as U.S. refiners ramped up exports to international markets.
Further signs of weak demand emerged from U.S. waterborne crude imports, which dropped to their lowest level in four years in February. The decline was largely attributed to a fall in Canadian oil shipments to the U.S. East Coast, where refiners were undergoing extended maintenance shutdowns.
While the U.S. considers removing tariffs on Canadian crude, no such relief has been extended to Mexican oil imports. The tariffs have disrupted supply chains for refineries in Texas and Louisiana, which traditionally rely on Mexican crude as a key feedstock due to its compatibility with their processing capabilities.
The lack of Mexican crude imports could lead to higher operating costs for U.S. refiners, forcing them to seek alternative suppliers or reduce production rates.
Looking ahead, oil traders remain on edge as they monitor developments in U.S. trade policy, OPEC+ production plans, and demand trends in major economies.
While a potential rollback of Canadian crude tariffs could stabilize the market, ongoing tensions with Mexico and a looming supply increase from OPEC+ could weigh on prices in the near term.
“Until we get more clarity on trade policies and OPEC+ output strategies, we expect continued price volatility,” said John Kilduff, a partner at Again Capital LLC.
Investors will also be watching upcoming economic data releases from China and the U.S., which could provide clues about global energy demand trends. Any further signs of slowing economic growth could add downward pressure to oil prices, making the road to recovery uncertain.
For now, oil prices have steadied, but whether this marks the beginning of a sustained rebound or just a temporary pause remains to be seen.
