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Oil prices fell for the third day in a row, tumbling nearly 3 per cent to the lowest level in three years as fears rise that US President Donald Trump’s trade war will slow economic activity and cut crude demand.
Brent crude, the international benchmark, dropped as low as $68.33 on Wednesday, the lowest since December 2021. West Texas Intermediate, the US marker, declined more than 4 per cent to $65.22.
The moves came after the US Energy Information Administration reported a larger-than-expected rise in American crude oil stocks, adding to concerns about a slowdown in economic activity after Trump confirmed new trade tariffs this week on Canada, Mexico and China.
Crude inventories rose by 3.6mn barrels in the past week, far exceeding analyst estimates. The EIA data was the latest in a series of negative indicators for demand.
“The key worry for markets at the moment is Trump’s tariffs, the retaliation from affected countries and what will happen next,” said Callum Macpherson, head of commodities at Investec. He added that the price was “at risk of a deeper correction”.
Wednesday’s drop added to losses since Monday when Opec+ surprised the market by confirming it would proceed with a previously delayed plan to pump more crude starting in April by ending long-standing production cuts. The cartel’s decision means eight members of the producer group, including Saudi Arabia and Russia, will increase production by a combined 120,000 barrels a day in April and a combined 2.2mn b/d barrels a day over the next 18 months.
Opec+ has repeatedly cut production in recent years to push up crude prices, regularly ignoring calls from the US to boost output to lower the cost of fuel, particularly for American consumers.
Three different sets of output cuts mean Opec+ members are producing almost 6mn b/d less than their combined capacity, representing about 6 per cent of global oil supply.
Saudi Arabia has shouldered the majority of the cuts to date, reducing its own production by 2mn b/d in the past two years. The Financial Times reported in September that for the first time in several years, Saudi officials were ready to bring back production, even if it led to a prolonged period of lower prices.
Amrita Sen of research group Energy Aspects said Wednesday’s drop was exacerbated by WTI prices falling below levels at which US producers had bought put options to hedge their price exposure. “Liquidity and growth fears have been weighing on broader sentiment that has dragged crude below key price levels and have now triggered further moves downwards,” she said.
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