The American Petroleum Institute (API) estimated that crude oil inventories in the United States fell by 1.455 million barrels for the week ending February 28. Analysts had expected a smaller 300,000-barrel draw. Earlier this week, the Department of Energy (DoE) reported that crude oil inventories in the Strategic Petroleum Reserve (SPR) stayed at 395.3 million barrels in the week ending February 28. Inventory levels in the SPR are hundreds of millions shy of the levels in inventory prior to the SPR withdrawal that took place under the Biden Administration. At 11:22 pm ET, Brent crude was trading down $1.48 (-2.07%) on the day at $70.14—a nearly $3 per barrel dip from this time last week and a $6 per barrel drop over the last two weeks. Oil prices began their slide on Monday after OPEC+ said it would begin the process of slowing unwinding its production cuts beginning April 1. The U.S. benchmark WTI was trading down on the day as well, by $1.17 (-1.71%) at $67.20—a nearly $2 per barrel decrease from last week’s level. Gasoline inventories fell in the week ending February 28, by 1.249 million barrels, adding onto the previous week’s 537,000-barrel increase. As of last week, gasoline inventories are now just slightly below the five-year average for this time of year, according to the latest EIA data. Distillate inventories saw a build this week, adding 1.136 million barrels in the latest week. In the week prior, distillate inventories fell 1.109 million barrels. Distillate inventories were already about 8% below the five-year average as of the week ending February 21, the latest EIA data shows. Cushing inventories—the benchmark crude stored and traded at the key delivery point for U.S. futures contracts in Cushing, Oklahoma, rose 1.630 million barrels for the week, after falling 1.182 million barrels in the week prior.
Oil Drops as Tariffs and OPEC+ Supply Shake Markets
Brent oil extended declines to the lowest closing price since November as US President Donald Trump’s tariffs kick off a series of trade wars and OPEC+ moves to revive production that has been halted for years. Trump delivered on his threat to hit Canada and Mexico with sweeping import levies and doubled an existing charge on China, sparking swift reprisals that threaten to reduce global economic growth and curtail energy demand. The moves come a day after OPEC+ said it would increase output after repeated delays, a decision that surprised a market already weighed down by expectations for a surplus later this year. Global benchmark Brent crude slipped to around $71 a barrel and earlier briefly dipped below $70 for the first time since October. Meanwhile, West Texas Intermediate notched only a marginal decline to around $68 a barrel as the potential loss of Canadian or Mexican supplies tightens the US market.
The turmoil also is accentuating a bearish posture in the market, with oil traders paying the biggest premiums for put options in five months.
“The OPEC+ announcement from yesterday to increase output coupled with the US tariffs on Mexican, Canadian and Chinese imports raise the prospects of an oversupplied market where economic growth and oil demand also suffer,” brokerage PVM wrote in a report. Technicals are also signaling a shift in longstanding market fundamentals, including a tighter market for US crude relative to Brent. WTI’s front-month spread — the difference in futures prices for immediate delivery and the next month — is trading at the biggest premium to the same gauge of Brent since mid-January, when the US ratcheted up sanctions against Russia.
Meanwhile, algorithmic-driven investors known as commodity trading advisers are holding the largest net-short position in WTI since early October, according to Stephen Roseme, managing member of Bridgeton Research Group.
“Unless there’s a contraction of supply outside of OPEC, prices are going to fall even further,” said Gregory Brew, a geopolitical analyst at the Eurasia Group. The firm sees Brent trading in a range with a lower end of $60 for the year, he added. Roughly 38% of more than 100 traders and analysts polled at a Bloomberg event in London on Feb. 26 saw a chance of oil hitting $50 this year.
NN: Market got it wrong…… again