WTI Crude Oil Faces Pressure Amid Rising Inventories and Tariff Uncertainty

West Texas Intermediate (WTI), the U.S. crude oil benchmark, is trading around $66.45 during early Asian trading on Thursday, marking its lowest level since December 2021. The decline follows a significant rise in U.S. crude oil stockpiles, as reported by the Energy Information Administration (EIA). For the week ending February 28, inventories surged by 3.614 million barrels, defying market expectations of a 290,000-barrel decline. Additionally, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) have reaffirmed their commitment to increasing production from April, adding further downward pressure on WTI prices.

Investors remain cautious amid concerns that tariffs imposed on Canadian, Mexican, and Chinese imports could hinder economic growth and reduce demand for oil. The Trump administration confirmed that tariffs on Canada and Mexico took effect on Tuesday, with a temporary exemption for automakers lasting one month. ING analysts Warren Patterson and Ewa Manthey noted that the uncertainty surrounding tariffs and rising OPEC+ supply has negatively impacted market sentiment.

Despite the pressure, WTI saw a slight rebound on Thursday, rising towards $67 per barrel in a technical correction following its multi-year lows. A U.S. official hinted that President Trump may consider eliminating the 10% tariff on Canadian energy imports that comply with trade agreements, providing some relief to the market. However, overall sentiment remains bearish due to the potential negative effects of tariffs and increased production from OPEC+.

On the sanctions front, the U.S. administration has set a deadline of April 3 for Chevron to wind down its operations in Venezuela. Chevron had been operating under a waiver, allowing it to export Venezuelan crude oil to the United States. With production halting, approximately 200,000 barrels per day of supply could be at risk. This development coincides with heightened U.S. sanctions against Iran, targeting its oil supply chain and further adding to market uncertainty.

Market data from the American Petroleum Institute indicated a 1.5 million barrel decline in U.S. crude oil inventories last week. However, gasoline stocks fell by 1.2 million barrels, while distillate inventories rose by 1.1 million barrels. The market remains focused on geopolitical factors, particularly the ongoing trade tensions and their potential impact on global oil demand.

As of 10:45 a.m. ET on Thursday, WTI crude was trading above $70 per barrel, marking a 2.14% increase on the day. Brent crude followed a similar upward trend, rising 1.94% to $73.94 per barrel. The oil market, which had been under pressure for most of the week, reversed its course following President Trump’s decision to revoke Chevron’s sanction waiver. This move effectively prevents the supermajor from continuing its operations in Venezuela, a country that has played a crucial role in global oil exports.

Despite the short-term rebound, the oil market remains volatile, with price fluctuations driven by ongoing concerns over supply, demand, and geopolitical developments. Investors are closely watching the evolving tariff situation, potential policy shifts, and further changes in OPEC+ output levels to gauge future price trends.