Oil prices have dropped for the third consecutive day, falling nearly 3% to their lowest point in three years. Concerns about the impact of US President Donald Trump’s trade war on the economy and oil demand are driving the decline.
Brent crude, the international benchmark, fell to $68.33 on Wednesday, its lowest since December 2021. Meanwhile, West Texas Intermediate, the US benchmark, dropped more than 4% to $65.22.
This decline follows a report from the US Energy Information Administration showing a larger-than-expected rise in US crude oil stocks. The increase in inventories has raised fears of an economic slowdown, especially after Trump announced new trade tariffs on Canada, Mexico, and China earlier this week.
Crude stocks rose by 3.6 million barrels last week, much higher than analysts’ expectations. This data adds to a series of negative signals regarding oil demand.
Callum Macpherson, head of commodities at Investec, noted that market concerns are centered on Trump’s tariffs, potential retaliation from affected countries, and the uncertain future. He warned that oil prices could face a “deeper correction.”
The drop on Wednesday added to losses since Monday, when Opec+ unexpectedly confirmed plans to increase crude production starting in April. The decision will end long-standing production cuts, with eight Opec+ members, including Saudi Arabia and Russia, set to raise output by 120,000 barrels per day in April. Over the next 18 months, they will increase production by a total of 2.2 million barrels per day.
In recent years, Opec+ has reduced production to drive up prices, despite US calls for increased output to lower fuel costs, especially for American consumers.
The group’s ongoing cuts have resulted in a production shortfall of nearly 6 million barrels per day, about 6% of global oil supply.
Saudi Arabia has made the largest cuts, reducing its output by 2 million barrels per day over the past two years. The Financial Times reported in September that, for the first time in several years, Saudi officials are considering increasing production, even if it means lower prices for a prolonged period.
Amrita Sen, from research group Energy Aspects, said the price drop was worsened by WTI falling below levels at which US producers had hedged their price exposure through put options. She explained that fears of economic slowdown and lower liquidity have been dragging crude prices below key levels, triggering further declines.
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