Oil Prices Ease Amid Tariff War Concerns

Oil prices eased on Thursday after surging the day before as worries about the impact of intensifying tariff wars on global economic growth and energy demand outweighed the positive sentiment from a larger-than-expected draw in U.S. gasoline stocks. Brent futures fell 7 cents, or 0.1%, to $70.88 a barrel by 0107 GMT, while U.S. West Texas Intermediate crude futures shed 11 cents, or 0.2%, to $67.57 a barrel. Both benchmarks rallied about 2% on Wednesday as U.S. government data showed tighter-than-expected oil and fuel inventories. U.S. crude stockpiles rose by 1.4 million barrels in the latest week, Energy Information Administration (EIA) data showed on Wednesday, which was less than the 2 million-barrel rise forecasters had expected. EIA/S U.S. gasoline inventories fell by 5.7 million barrels, more than the 1.9 million-barrel draw expected by analysts, while distillate stocks also dropped more than anticipated. The EIA data also showed that crude inventories in the U.S. Strategic Petroleum Reserve (SPR) rose to their highest level since 2022.



"Declining U.S. gasoline inventories raised expectations for a seasonal demand increase in spring, but concerns about the global economic impact of tariff wars weighed on the market," said Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment. "With strong and weak factors progressing simultaneously, it has become difficult for the market to lean decisively in one direction or the other," he added.

Donald Trump threatened on Wednesday to escalate a global trade war with further tariffs on European Union goods, as major U.S. trading partners said they would retaliate for trade barriers already erected by the U.S. president. Trump's hyper-focus on tariffs has rattled investors, consumers and business confidence and raised U.S. recession fears. Meanwhile, the Organization of the Petroleum Exporting Countries said on Wednesday that Kazakhstan led a sizeable jump in February crude output by the wider OPEC+, highlighting a challenge for the producer group in enforcing adherence to agreed output targets. OPEC's monthly report showed OPEC+, which includes OPEC, Russia and other allies, raised output in February by 363,000 barrels per day to 41.01 million bpd. The group kept its forecasts for relatively strong growth in global oil demand in 2025. "Trade concerns are expected to contribute to volatility as trade policies continue to be unveiled. However, the global economy is expected to adjust," OPEC said.

In the most recent Short-Term Energy Outlook (STEO) report for March 2025, the US Energy Information Administration (EIA) projects that global oil markets will remain relatively tight. EIA projects that global oil inventories will decline in second-quarter 2025, driven partly by reduced crude oil production in Iran and Venezuela. As a result, the Brent crude oil spot price is forecast to rise to about $75/bbl by third-quarter 2025 from $70/bbl. However, EIA expects global oil inventories to increase later in 2025 and into 2026 as OPEC+ unwinds production cuts and non-OPEC oil production rises. This increase in supply is anticipated to place downward pressure on oil prices, leading to an average Brent crude oil price of $68/bbl in 2026.



Market uncertainties persist as the evolving tariff policy has added uncertainty around expectations for global oil demand growth, concerns about which had persistently weighed on oil prices over the last year. On Feb. 1, US President Donald Trump issued an Executive Order introducing tariffs on imports from Canada, Mexico, and China. However, the implementation of tariffs on most goods from Mexico and Canada has been postponed until early April. The EIA noted that "the evolving tariff policy has added uncertainty around expectations for global oil demand growth, concerns about which had persistently weighed on oil prices over the last year."

In the long term, the world is poised for a year of surplus oil production in 2025. Greater upstream activity in non-OPEC countries, such as the United States and Guyana, is set to flood the market with more oil. This trend is expected to continue well into 2025 and 2026, as economic stagnation in major markets such as China and Germany has resulted in oil production outperforming demand. This has kept benchmark prices such as WTI and Brent far below 80 U.S. dollars per barrel since summer 2024. The EIA's forecast for the Henry Hub spot price, which is now projected to average around $4.20/MMbtu in 2025—11% higher than last month's forecast, and near $4.50/MMbtu in 2026, an 8% increase from the previous forecast, further supports this outlook.