Oil Prices Drop Over 2% Amid Rising U.S. Crude Stockpiles, OPEC+ Output Hike, and U.S. Tariffs

Oil prices fell for the fourth straight session as U.S. crude stockpiles surged, OPEC+ announced an output hike, and new U.S. tariffs sparked trade tensions. Brent crude settled at $69.30 per barrel, down 2.45%, while WTI fell to $66.31 per barrel, down 2.86%, after touching multi-year lows of $68.33 and $65.22, respectively. U.S. crude inventories rose by 3.6 million barrels to 433.8 million barrels, far exceeding the expected 341,000-barrel increase, triggering a $2 drop in Brent prices. OPEC+ decided to increase production by 138,000 barrels per day from April, the first hike since 2022, raising concerns about further supply additions. Meanwhile, the U.S. imposed tariffs on Canada, China, and Mexico, leading to swift retaliatory measures and economic uncertainty. The 25% tariff on Canadian and Mexican energy imports remains, though relief for crude oil and gasoline is under consideration. JP Morgan analysts warned that a 100-basis-point slowdown in U.S. GDP growth could reduce global oil demand growth by 180,000 barrels per day. The Biden administration also revoked Chevron’s Venezuela license, putting 200,000 barrels per day of supply at risk. February's global oil demand averaged 103.6 million barrels per day, up 1.6 million barrels per day year-over-year, but below the expected 1.8 million barrels per day increase. With rising supply and slowing demand, oil markets remain under pressure.

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OPEC Oil Output Rises in February as Iran and Nigeria Boost Production

OPEC's oil production increased by 170,000 barrels per day (bpd) in February, reaching 26.74 million bpd, as Iranian exports remained strong despite renewed U.S. efforts to curb them, and Nigeria exceeded its OPEC+ target. Iran led the gains with an 80,000 bpd increase, reaching 3.30 million bpd, matching its highest output since 2018, while Nigeria raised production by 70,000 bpd above its quota, driven by higher exports and increased domestic refining at the Dangote refinery. OPEC+, which includes Russia and other allies, has maintained production cuts through March but plans to start raising output in April. Saudi Arabia's production declined slightly, while Iraq's output edged higher, with both remaining below their OPEC+ quotas, whereas the UAE pumped slightly above its target. Discrepancies remain between different tracking estimates, with the International Energy Agency suggesting that Iraq and the UAE may be producing significantly more than official figures indicate. No major production declines were reported, and the survey results were compiled using data from LSEG, Kpler, and industry sources.

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U.S. Refiners Reduce Mexican Crude Orders Amid Tariff Uncertainty

U.S. Gulf Coast refineries reduced orders for Mexican crude oil by 17% in March compared to February, even before President Donald Trump confirmed a 25% tariff on Mexican imports, including crude oil. Analysts warn these tariffs could drive up U.S. gasoline prices and disrupt refinery supply chains, as Mexico is the second-largest crude supplier to the U.S. after Canada. Pemex, Mexico’s state oil company, plans to export 749,000 barrels per day in March, down 9.7% from the previous month, though delayed February shipments prevented a steeper decline. Pemex is looking for alternative buyers as it prepares to set April export volumes. Meanwhile, Mexico’s crude production continues to decline, reaching a 40-year low in January due to aging oil fields, lack of new discoveries, and quality issues such as high water and salt content in crude. The full impact of the tariffs on U.S.-Mexico oil trade remains uncertain as market participants assess potential shifts in supply routes.

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U.S. Crude Imports Hit Four-Year Low as Refinery Demand Weakens and Tariffs Disrupt Trade

U.S. waterborne crude oil imports fell to 2.32 million barrels per day (bpd) in February, their lowest since March 2021, as refinery maintenance and new tariffs on Canadian crude reduced demand. Canadian imports dropped by a third to 265,000 bpd, with East Coast-bound shipments declining by 67% amid a major 50-day turnaround at Phillips 66’s Bayway Refinery in New Jersey. East Coast refinery utilization plummeted to 54.8% from 82.5%, contributing to the sharp decline in crude imports. At the same time, U.S. refiners have been increasing capacity for domestic light, sweet crude, further reducing reliance on foreign oil. Chevron’s Pasadena refinery completed a retrofit to process more Permian crude, while Exxon Mobil and Phillips 66 expanded refinery capacity to handle domestic supply. The uncertainty surrounding Donald Trump’s tariffs on Mexico and Canada also dampened February imports, as buyers hesitated before securing alternative sources. Meanwhile, Brazilian crude shipments to the U.S. surged 58% to 292,000 bpd, possibly as a hedge against tariffs, and demand for barrels from the Middle East and Colombia is expected to grow. Analysts predict the full impact of tariffs will become clearer in the coming weeks.

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Canada’s Seaborne Crude Exports Surge as Tariffs Reshape Oil Trade

Canada’s seaborne crude oil exports have surged by 59% over the past year, driven by the expansion of the Trans Mountain Pipeline, despite facing 10% U.S. tariffs on its energy exports. The pipeline, which increased capacity from 300,000 barrels per day (bpd) to 890,000 bpd, has enabled British Columbia to export 373,000 bpd so far this year, with 42% of shipments heading to East Asia. Aframax crude tankers, which handle 75% of Vancouver’s exports, primarily serve Asian markets, while panamax tankers, accounting for 25%, mainly supply the U.S. Despite the rise in seaborne exports, most Canadian oil still flows to the U.S. through pipelines and rail. Initial trade tensions in February led to speculation that Canadian sellers would either absorb tariff costs with U.S. buyers or expand sales in Asia. The tariffs, briefly postponed, were reinstated on Tuesday, but U.S. Commerce Secretary Howard Lutnick hinted at potential relief, citing ongoing negotiations with Canada and Mexico. He suggested President Donald Trump might consider a compromise deal, possibly reducing the tariff burden.

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Wall Street’s $6.7bn Chinese-Built Tanker Fleet Faces Potential U.S. Tariffs

New York-listed tanker owners control over $6.7 billion worth of vessels, many of which were built in China, potentially facing additional surcharges if the U.S. moves forward with plans to penalize Chinese shipbuilding. The fleet includes 162 ships, nearly 20% of the global tanker fleet, with major owners like Frontline, International Seaways, Teekay Tankers, Hafnia, and Torm having a significant portion of their fleets built in China. Teekay Tankers has the highest share, with 44.4% of its vessels built in Chinese yards. The U.S. is considering tariffs, including a $1.5 million charge per port call for Chinese-built ships, which could impact these companies. While Greek-owned tankers generally avoid Chinese yards, some owners are still engaging in newbuilding contracts with Chinese shipyards. Chinese state-linked owners, such as China Merchants Group and Cosco Shipping, dominate the Chinese-built tanker fleet. If these tariffs are enacted, it could lead to increased costs and disrupt U.S. crude oil shipments, potentially diverting trade to other regions.

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China Unveils Major Renewable Projects but Struggles to Meet Climate Targets

China announced plans for large-scale renewable energy projects to combat climate change, aiming to peak carbon emissions before 2030 and achieve carbon neutrality by 2060. The government will develop new offshore wind farms and expand "new energy bases" in desert areas while constructing a direct power transmission route from Tibet to Hong Kong, Macao, and Guangdong. A controversial hydropower project on the Yarlung Tsangpo river in Tibet, which has raised concerns in India over its impact on downstream water flow, is also included. Despite these efforts, China will continue increasing coal production and supply, while testing low-carbon technology in coal-fired power plants. The country faces difficulties balancing economic growth with environmental goals, as its 3.4% reduction in carbon intensity last year fell short of expectations due to rising energy consumption and extreme weather. Analysts believe China will miss its five-year target of an 18% carbon intensity reduction by 2025, and struggles to meet its energy efficiency goals despite a 3.8% reduction in energy use per unit of economic growth last year. Greenpeace policy advisor Yao Zhe noted that despite record renewable energy expansion, China's economy has not significantly improved in energy efficiency.