Onome Amuge
Oil prices retreated on Wednesday, succumbing to the mounting pressures of rising U.S. crude stockpiles and investor jitters over the escalating trade tensions between the U.S. and China, overshadowing President Donald Trump’s renewed efforts to cut off Iranian oil exports.
Brent crude was down 39 cents, or 0.51 percent, to $75.81 a barrel, while U.S. West Texas Intermediate (WTI) crude shed 26 cents, or 0.36 percent, to $72.44 a barrel.
The volatile oil markets experienced a reversal in fortunes on Tuesday, with WTI crude initially plunging to a nearly one-month low of three percent after China retaliated to U.S. tariffs by targeting U.S. energy exports, such as oil, LNG, and coal.
However, the sell-off was quickly arrested as oil prices surged following Trump’s announcement that he would restore the “maximum pressure” campaign against Iran, a strategy he had implemented during his first term that had led to a complete cessation of Iranian crude exports.
As Wednesday’s trading session unfolded, crude oil markets were held back by a significant buildup in U.S. crude inventories, as revealed by the latest market intelligence.
According to the API figures reported by market sources, crude inventories rose by a higher-than-anticipated 5.03 million barrels during the week ending January 31st.
As the U.S. reported rising crude and fuel stockpiles, investors were quick to anticipate a slowdown in consumption, further aggravating their concerns about the potentially devastating impact of tariffs on global economic growth and energy demand.
The fallout from China’s retaliatory tariffs on U.S. energy imports, according to Goldman Sachs analysts, will be somewhat mitigated by the unchanged global supply and demand dynamics of these commodities. Both countries, they suggested, will likely be able to divert their export flows to alternative markets.
President Trump’s decision to reinstate the “maximum pressure” campaign against Iran, a hardline strategy aimed at coercing Tehran to abandon its nuclear ambitions, could potentially drive the country’s oil exports to zero, analysts asserted.
Trump, while open to a potential deal with Iran, signed a presidential memorandum to re-implement the United States’ stringent policy on the country.
According to analysts at ANZ, Iran’s oil exports, estimated at approximately 1.5 million barrels per day based on ship tracking data, will be severely curtailed if the plan is fully realised.
