Oil prices swooned on Wednesday as economic uncertainty rippled through global markets, a reaction to President Trump’s tariffs on Canada, China and Mexico and a decision by members of the OPEC Plus oil cartel to begin increasing crude production in April.
Since last year, OPEC Plus has signaled its intention to pump more oil, but doing so now in the midst of turbulence from a trade war between the United States and various partners surprised some analysts.
“Analysts were thinking they would surely defer the increases given the macroeconomic threat from tariffs,” said David Fyfe, chief economist of Argus Media, a London commodities research firm.
On Wednesday, prices for Brent crude futures, the international benchmark, plummeted about 3.6 percent to $68.50 a barrel, the lowest since 2021. West Texas Intermediate, the American standard, fell more than 4 percent to $65.30 a barrel.
In a possible hint of weakening demand, crude oil inventories in the United States rose by a hefty 3.6 million barrels — much more than analysts expected — in the last week of February, according to the Energy Information Administration. Still, these stocks, which are closely watched by the markets, are 4 percent below their five-year averages.
Several conflicting trends are influencing oil prices. Oil consumption is highly sensitive to the performance of the world economy, which might slow if the trade war heats up, crimping trade, air travel and other activities.
At the same time, several members of OPEC Plus, including the United Arab Emirates and Iraq, want to increase production, partly to fulfill agreements with international investors. The group also includes Saudi Arabia and Russia.
The oil-producing countries have ensnared themselves in a complex series of agreements, which analysts say the markets struggle to interpret. But traders fear that the millions of barrels a day of oil currently being held off the market could eventually come back at a time when world oil consumption is growing only modestly.
In addition, it is hard to gauge what impact the Trump administration’s energy strategy will have on the oil markets. Tighter sanctions on producers like Iran and Venezuela would reduce supplies. But easing regulation of the petroleum industry in the United States might increase oil production. And removing restrictions on Russian energy as part of an effort to achieve a cease-fire in the war in Ukraine could also add to the global supply.
According to its announcement on Monday, OPEC Plus will gradually increase output by a total of 2.2 million barrels a day, or roughly 2 percent of global supplies, over a period running well into 2026. The group said Sunday that it could pause or even reverse the increases if conditions warranted.
Richard Bronze, head of geopolitics at Energy Aspects, a research firm, said there was a school of thought within OPEC Plus that the producers could begin easing the production cuts “because they’ll always have the flexibility to adjust or pause at any point later in the year.”
