Crude Shock: Why Rising Inventories and Trade Wars Are Sinking Oil Prices—and What Investors Should Do

The oil market has been thrown into a tailspin this week, and investors are left scrambling to make sense of it all. Let’s break down what’s happening and what it means for your portfolio.

The Inventory Surprise: A Build When a Draw Was Expected

The U.S. Energy Information Administration (EIA) reported that crude inventories increased by 244,000 barrels for the week ending April 18, 2025. This was a stark contrast to analyst expectations of a 700,000-barrel draw. Even more concerning: this marks the fourth consecutive week of inventory builds, a sign that supply is outpacing demand despite strong demand signals from refined products like gasoline and distillates.

Gasoline stocks fell by a robust 4.5 million barrels—far exceeding forecasts—and distillate inventories dropped 2.3 million barrels, also outperforming expectations. Normally, such strong product demand would buoy crude prices. But this week, crude prices tumbled anyway. Why?

The Culprit: Trade Wars and OPEC+ Politics

The answer lies in trade policy and geopolitical moves. The U.S. imposed new tariffs dubbed the “Liberation Day tariffs,” while China retaliated with a 34% tariff on U.S. crude exports. These moves have created a perfect storm of uncertainty.

On the day of the EIA report, Brent crude fell to $66.34/barrel (down 1.63%) and WTI dropped to $62.54/barrel (down 1.77%). This follows a 14% decline in Brent prices since April 2, as traders priced in the impact of these tariffs and OPEC+’s decision to accelerate production increases.

The Data Investors Can’t Ignore

• Inventory Levels: Crude stocks remain 5% below the five-year average, but the consecutive builds are unnerving.
• Refinery Activity: Refineries operated at 88.1% capacity, with crude imports falling to 5.6 million barrels/day.
• Global Demand Outlook: The EIA now forecasts $68/barrel for Brent in 2025, a $6 drop from earlier estimates, citing reduced demand growth.

Meanwhile, Mont Belvieu propane prices are projected to fall 18% in 2025 due to China’s tariffs stifling U.S. exports—a reminder of how interconnected energy markets are.

What’s Next for Oil Investors?

This is a market of mixed signals, but here’s how to navigate it:

1. Short Crude Exposure: Consider positions in inverse oil ETFs like USO or SCO, which profit from price declines.
2. Play Refiners: Companies like Valero (VLO) or Marathon Petroleum (MPC) could benefit from strong product demand (gasoline and distillate draws) even as crude prices slump.
3. Watch OPEC+: If they reverse production hikes, prices could rebound—but don’t bet on it yet.

Final Verdict: Bearish for Now, but Stay Alert

The data is clear: trade wars and supply gluts are crushing oil prices. The EIA’s report, combined with geopolitical chaos, suggests crude could test lower levels. However, refined product demand remains robust, and the five-year inventory deficit hasn’t erased yet.

Investors should proceed cautiously. Short-term traders might capitalize on the downturn, but long-term bulls need to see a resolution to trade disputes and a reversal in inventory trends. For now, stay defensive—the oil market is a minefield until these clouds clear.

In Jim’s words: “Don’t fight the tape—oil’s going down, and you better be ready to adapt!”

Final Takeaway: Oil’s decline isn’t just about inventories—it’s about global economics. Until trade tensions ease, investors should tread lightly in crude but stay open to opportunities in refining and propane.