Oil prices fell for a third session on Wednesday, as investors worried about OPEC+ plans to press ahead with production increases in April, and escalating trade tensions due to tariffs imposed by U.S. President Donald Trump on Canada, China and Mexico.
Brent crude futures fell 45 cents, or 0.63%, to $70.59 a barrel. U.S. West Texas Intermediate crude fell 74 cents, or 1.08%, to $67.52 a barrel.
In the previous session, contracts settled near multi-month lows, weighed down by expectations that U.S. tariffs and counter-tariffs by affected countries would slow economic growth and reduce fuel demand.
Ashley Kelty, an analyst at Panmore Liberam, said that “the imposition of tariffs on China, Canada and Mexico by the United States provoked swift retaliations from each country, raising concerns about slowing economic growth and the subsequent impact on energy demand.”
Canada and China immediately reacted to Trump’s tariffs on Tuesday, with Mexican President Claudia Sheinbaum saying the country would retaliate, without giving details.
Meanwhile, the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+, decided on Monday to increase production for the first time since 2022, further putting pressure on crude prices.
The group will make a small increase of 138,000 bpd from April, the first step in planned monthly increases to cancel its cuts of about 6 million bpd, equivalent to about 6% of global demand.
“There is some concern in the market that the OPEC+ decision is the beginning of a series of monthly supply additions, but the statement from OPEC+ emphasizes the approach of returning barrels only if the market is able to absorb them,” said UBS analyst Giovanni Sonoco.
Oil prices fall as trade tensions escalate
West Texas Intermediate (WTI) crude futures on the New York Mercantile Exchange (NYMEX) fell sharply to nearly $67.50 in Wednesday’s European session. Oil price weakens as investors worry about outlook for oil demand amid escalating global trade tensions.
China, Canada and Mexico on Tuesday announced retaliatory tariffs on imports from the United States. On the same day, 25% tariffs on Canada and Mexico and additional 10% tariffs on China came into effect.
US President Donald Trump also confirmed that his plans to impose-for-tat tariffs are in place and will take effect on April 2.
Market participants believe the escalating tariff war has stopped employers around the world from making new business investments as Trump has yet to unveil a detailed plan for import duties. Such a scenario would reduce oil demand in the short term, negatively affecting the price of oil significantly.
Apart from escalating global trade tensions, OPEC+’s emphasis on increasing oil production for the first time since 2022 also reduced the attractiveness of the oil price. OPEC+ is set to increase its oil production in April by 138,000 barrels per day.
Meanwhile, the price of oil also failed to take advantage of the fall in the US dollar. The US Dollar Index (DXY), which tracks the value of the dollar against six major currencies, fell slightly below 105.00, the lowest level seen this year. Going forward, investors will focus on the US nonfarm payrolls data for February, which will be released on Friday. US labor market data will affect market expectations on the monetary policy outlook for the Board of Federal Reserve.
Oil prices fall amid OPEC changes and China cuts
Brent prices dropped to $70 a barrel as OPEC+ decided to phase out voluntary production cuts. However, Elkay Global Financial Services believes that this level remains favorable for Indian oil marketing companies (OMCs), while the impact on upstream players like Oil and Natural Gas Corporation (ONGC) and Oil India may remain limited.
China will cut retail gasoline and diesel prices on Thursday on the basis of recent changes in global oil prices, the National Development and Reform Commission said on Wednesday.
China’s three largest oil companies — China National Petroleum Corporation, China Petrochemical Corporation, and China National Offshore Oil Corporation — along with other oil refineries, received instructions to effectively regulate the production and transportation of refined petroleum products to ensure stable supplies.
Under the current pricing mechanism, the prices of refined petroleum products are adjusted according to changes in global crude oil prices.
The National Development and Reform Commission said relevant departments in various regions should intensify market supervision and inspection efforts. In addition, it must implement strict measures to eliminate activities that violate national price policies to ensure order in the market.
Analysts at Morgan Stanley Research said it was possible that OPEC+ could offer only a few monthly increases, rather than a complete rollback of the cuts.
The Trump administration also said on Tuesday it had terminated a license granted by the United States to U.S. oil producer Chevron since 2022 to operate in Venezuela and export its oil.
Commodity strategists at ING wrote in a note on Wednesday that the decision puts 200,000 barrels per day of supply at risk. Meanwhile, U.S. crude inventories fell by 1.46 million barrels in the week ended Feb. 28.
