Oil prices steadied on Wednesday following industry data that indicated a slightly smaller-than-expected increase in U.S. inventories. However, caution surrounding trade tariffs and the ongoing Federal Reserve meeting continued to linger.
Crude prices face challenges amid economic concerns
Crude prices experienced some losses this week as traders expressed concerns over weak economic data from China. Additionally, worries that U.S. President Donald Trump’s trade tariff plans could hinder oil demand added to the unease. Oil markets were also affected by Trump’s intentions to boost energy production within the U.S., and he urged the Organization of Petroleum Exporting Countries to ramp up production to lower oil prices.
Brent oil futures set to expire in March steadied at $77.47 a barrel, while West Texas Intermediate crude futures were flat at $73.81 a barrel as of 20:31 ET (01:31 GMT).
U.S. inventories see smaller-than-expected build — API
Data released by the American Petroleum Institute on Tuesday demonstrated that U.S. oil inventories rose by 2.86 million barrels during the week ending January 24, which was below the anticipated build of 3.7 million barrels. The API data often precedes a similar report from official inventory sources, which is expected later on Wednesday. U.S. inventories have experienced nine consecutive weeks of draws, driven by increased demand for heating due to cold weather and a rise in travel demand during the year-end holiday season.
Demand remains steady despite production concerns
While demand for oil has remained consistent in the world’s largest fuel-consuming nation, traders are preparing for an increase in oil production under Trump. Last week, he declared a national energy emergency to enhance output.
Trump tariffs and the Fed meeting are pivotal
On Tuesday, the White House reaffirmed Trump’s warning of potential trade tariffs against Canada, China, and Mexico by February 1, which falls on this Saturday. Trump has threatened a 25 percent duty on imports from Mexico and Canada, alongside a 10 percent duty against China. Tariffs on China are particularly concerning for oil markets, as they indicate increased economic pressure on the world’s leading oil importer.
Chinese markets are currently closed for the week-long Lunar New Year holiday. However, prior to the holiday, purchasing managers index data released on Monday highlighted persistent weaknesses in Chinese business operations. In addition to Trump’s tariffs, attention is also directed towards the conclusion of a Federal Reserve meeting on Wednesday, where it is widely anticipated that the central bank will maintain steady interest rates while adopting a hawkish stance. The dollar showed strength in anticipation of the Fed meeting, which in turn exerted pressure on crude markets.
