Oil prices dropped over 2% on Wednesday as U.S. crude and gasoline stockpiles saw a significant build, indicating weaker demand, while escalating U.S.-China trade tensions raised concerns over economic growth. Brent crude fell $1.59 (2.09%) to $74.61 per barrel, while U.S. West Texas Intermediate (WTI) dropped $1.67 (2.3%) to $71.03 per barrel. The Energy Information Administration (EIA) reported a sharp rise in U.S. crude inventories as refiners, facing soft gasoline demand, ramped up maintenance work. Analysts noted refiners have little immediate need for crude, further pressuring prices.
Trade tensions deepened after China imposed tariffs on U.S. oil, liquefied natural gas, and coal, retaliating against U.S. levies on Chinese exports. This led to a 3% drop in WTI on Tuesday, hitting its lowest level since December 31. Market analysts highlighted that redirecting U.S. crude to alternative buyers could further disrupt demand.
Meanwhile, Iranian President Masoud Pezeshkian called for OPEC unity against possible renewed U.S. sanctions, following Trump’s vow to reinstate his “maximum pressure” campaign on Tehran. Iran’s oil exports, which brought in $53 billion in 2023, are at their highest levels since 2018. Analysts warn that if sanctions are reimposed, the resulting supply squeeze could boost oil prices, especially amid slower-than-expected supply adjustments from OPEC+. The oil market now faces a dual challenge: weaker demand due to trade tensions and potential supply disruptions from Iran, creating uncertainty in price direction.