Oil prices slipped on Thursday following a strong rally in the previous session, driven by a larger-than-expected draw in U.S. gasoline stocks. Brent futures fell by 5 cents to $70.90 a barrel, while U.S. West Texas Intermediate crude futures dropped 10 cents to $67.58 a barrel.
The decline comes after both benchmarks rose about 2% on Wednesday, supported by U.S. government data showing tighter-than-expected oil and fuel inventories. U.S. gasoline stocks saw a significant drop of 5.7 million barrels, far surpassing analysts’ expectations of a 1.9 million-barrel draw. Distillate stocks also decreased more than anticipated, even as crude stocks saw gains.
“Declining U.S. gasoline inventories raised expectations for a seasonal demand increase in spring, but concerns about the global economic impact of tariff wars weighed on the market,” explained Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment. He noted that the market is struggling to find a clear direction, as both strong and weak factors are influencing price movements simultaneously.
A major concern for markets is U.S. President Donald Trump’s recent threat to escalate the global trade war with additional tariffs on European Union goods. Trump’s aggressive stance on tariffs has rattled investor sentiment, raised concerns about recession risks, and dampened business confidence.
At the same time, the Organization of the Petroleum Exporting Countries (OPEC) reported that Kazakhstan led a significant increase in February crude output within the broader OPEC+ group. This surge in production poses a challenge for the group in adhering to previously agreed output targets, contributing to further market uncertainty.
Additionally, concerns about jet fuel demand weighed on the market. JP Morgan analysts pointed out a 5% year-over-year decrease in U.S. passenger volumes for March, following stagnant traffic in February, indicating softer demand for aviation fuel.
Despite these headwinds, firm demand expectations helped cap the overall weakness in oil prices. Analysts noted that robust U.S. demand, along with ongoing geopolitical tensions, including Ukraine’s deployment of drones targeting Russian energy infrastructure, offered some support to prices. As of March 11, global oil demand was averaging 102.2 million barrels per day, expanding by 1.7 million barrels per day year-over-year, exceeding projections for the month by 60,000 barrels per day.
As oil markets continue to balance supply-demand dynamics with broader macroeconomic concerns, price fluctuations are expected to persist in the near term.