Oil Prices Under Pressure: Can WTI Crude (CL=F) and Brent (BZ=F) Rebound?
Oil prices are facing their most significant correction in months, with WTI crude (CL=F) plunging to $67.75 per barrel and Brent crude (BZ=F) sliding to $70.87. The recent losses stem from a combination of OPEC+ ramping up supply, U.S. tariffs triggering fears of a trade war, and unexpected inventory builds in the United States. These factors have shifted market sentiment, raising questions about whether oil can recover or if this is the beginning of a more extended downturn.
OPEC+ Supply Expansion Adds Pressure on Oil Markets
One of the biggest catalysts driving oil prices lower is OPEC+ confirming its decision to increase production from April. After months of speculation, the oil-producing alliance announced that it will gradually unwind its production cuts, adding 120,000 barrels per day (bpd) in April and eventually scaling up to a total increase of 2.2 million bpd over the next 18 months.
This decision has shaken the oil market, as investors had anticipated that OPEC+ would maintain tighter supply to support prices. Saudi Arabia, the primary driver behind previous production cuts, had already reduced its output by 2 million bpd in the last two years. Now, with production increases on the horizon, oil traders are pricing in a potential supply glut, especially as global demand faces uncertainties.
U.S. Tariffs and Trade War Fears Weigh on Demand Expectations
Geopolitical developments are also playing a significant role in the latest oil price decline. President Donald Trump’s administration imposed a 25% tariff on Mexican and Canadian imports, along with a 20% tariff on Chinese goods. These moves have sparked retaliatory measures from Canada and China, raising concerns that an escalating trade war will slow global economic activity and weaken crude oil demand.
If higher tariffs reduce manufacturing output and consumer spending, oil demand could decline, exacerbating the pressure on crude prices. Historically, trade tensions have led to economic slowdowns, and with the global economy already facing headwinds from high interest rates and slowing growth in China, the outlook for oil demand is becoming increasingly uncertain.
U.S. Crude Inventories Unexpectedly Rise, Adding More Selling Pressure
The latest U.S. Energy Information Administration (EIA) report revealed a larger-than-expected crude oil inventory build of 3.6 million barrels last week, far exceeding analyst expectations. This increase followed a 1.455 million-barrel decline reported by the American Petroleum Institute (API) a day earlier, creating mixed signals in the market.
Additionally, the EIA reported that:
- Gasoline inventories decreased by 1.4 million barrels, compared to a 400,000-barrel increase the previous week.
- Distillate stockpiles fell by 1.3 million barrels, marking a reversal from the prior week's build of 3.9 million barrels.
- Total U.S. petroleum product demand over the last four weeks averaged 20.2 million barrels per day (bpd), a 3.4% increase from a year ago.
Despite the rise in crude inventories, strong demand for refined products, particularly distillates, suggests some resilience in fuel consumption. However, the unexpected inventory build raises questions about whether supply is outpacing demand, further contributing to bearish sentiment in oil markets.
China’s Demand Outlook: Has Oil Consumption Peaked?
Another critical factor impacting oil prices is China’s shifting energy consumption patterns. The world’s largest crude importer has seen a decline in fuel demand, driven by the rapid adoption of electric vehicles (EVs) and liquefied natural gas (LNG) trucks. According to Sinopec, diesel demand may have peaked as early as 2019, while gasoline consumption reached its highest level in 2023 and is expected to trend lower.
The International Energy Agency (IEA) recently reported that China’s overall fuel consumption may have already peaked, raising concerns that global oil demand growth may slow in the coming years. Compounding this issue, the Biden administration’s sanctions on Russian crude exports have disrupted supply chains, making it more expensive for China to import Russian oil.
This combination of weaker demand growth in China and higher oil transportation costs has led to reduced crude imports in early 2025, further pressuring prices.
Technical Analysis: Can WTI Crude (CL=F) Hold Support at $67?
WTI crude oil (CL=F) is currently testing key support at $67 per barrel, a level that has previously acted as a major buying zone. If oil prices fail to hold this level, the next significant support lies at $65, where traders may look for a potential rebound.
On the upside, resistance is seen at $70, followed by the critical $73 level, which coincides with the 50-day moving average. A breakout above this zone could signal renewed bullish momentum, but for now, the overall trend remains bearish.
The Relative Strength Index (RSI) is approaching oversold territory, suggesting that a short-term bounce is possible. However, given the current bearish macroeconomic environment, any rallies may be short-lived unless there is a shift in OPEC+ policy or a resolution to the trade dispute between the U.S., Canada, and China.
Will Oil Prices Recover, or Is More Downside Ahead?
The outlook for oil remains uncertain, with supply-side pressures from OPEC+ production increases, demand concerns due to trade war fears, and bearish inventory data weighing on sentiment.
If tariff disputes escalate further, leading to lower global economic growth, oil prices could face further declines toward the $65 mark. Conversely, if OPEC+ signals a willingness to slow down its production increases or if global demand stabilizes, we could see a rebound toward the $73-$75 range in the coming weeks.
For now, oil remains under pressure, and traders will be closely watching for any updates from OPEC+, geopolitical developments, and U.S. economic data to determine the next major move in crude prices.
