Oil prices drop on higher U.S inventories, OPEC supply
Agency Report
Oil prices come under pressures on Tuesday on expected increase in U.S. inventories, and the Organisation of Petroleum Exporting Counties (OPEC) and allies’ member countries (OPEC+) plan to increase output gradually.
Brent crude decreased by 0.6%, trading at $70.80 per barrel, down from $71.28 at the close of the previous session. The US benchmark West Texas Intermediate (WTI) declined by 0.7%, settling at $67.63 per barrel, compared to its prior session close of $68.10.
Oil prices continued to fall as global supply concerns eased after the OPEC+ group, which consists of the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producers, announced that they would stick to their decision to gradually increase production starting in April.
On Monday, the eight OPEC+ member countries implementing the production cuts held an online meeting. During the meeting it was confirmed that the decision to phase out the voluntary production cuts by April 2025 will be maintained. This will be the first production increase by the OPEC+ group since 2022.
At the 38th OPEC and non-OPEC Ministerial Meeting last year, the group decided to extend the voluntary production cut of 2.2 million barrels per day, implemented by Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman, until the end of March 2025.
The countries plan to gradually phase out this output cut from April 2025 to September 2026.
Meanwhile, new US tariffs on imports from Canada, Mexico, and China heightened fears of a trade war, which could slow economic growth and reduce energy demand. US President Donald Trump’s 25% tariffs on imports from Canada and Mexico will take effect today.
In addition, Trump stated that large quantities of fentanyl are flowing from China to the US, and announced that an additional 10% tariff will be imposed on goods imported from China.
U.S. crude oil inventories are forecast to have increased by 1.2 million barrels for the week ended Feb. 28, compared with a decrease of 2.3 million barrels in the previous week, Macquarie said in a Monday note.
Net imports are expected to have modestly increased, with exports down 0.3 million barrels per day and imports up minimally on a nominal basis, Macquarie noted.
Domestic supply is projected to have risen by 0.3 million barrels. Strategic petroleum reserve stocks are again forecast to have remained unchanged week over week.e
Petrol stocks are expected to have gained 1.3 million barrels. Jet fuel stocks are also forecast to have edged higher by 0.3 million barrels. Meanwhile, distillate stockpiles are expected to have fallen by 1.2 million barrels, Macquarie said.
Implied demand for the three products is forecast at 14.5 million b/d. The U.S. Energy Information Administration is scheduled to release its weekly petroleum inventory report on Wednesday.
