Week in Review: Will OPEC+ Supply Hikes or Trade Policy Uncertainty Win Out?

Oil prices have fluctuated throughout the week, with Brent and WTI crude futures showing volatility due to trade policy shifts and OPEC+ production decisions. This morning, Brent futures rose by $1.17, or 1.68%, to $70.63 per barrel, while WTI increased by $1.15, or 1.73%, to $67.51 per barrel. Despite these gains, both benchmarks are set to close the week down by over 3%, with Brent falling 3.4% and WTI declining 3.2%, marking their largest weekly drops since November and January, respectively.

One of the primary factors influencing prices this week was OPEC+’s decision to gradually increase crude oil production starting in April, adding 138,000 barrels per day to the market. However, Russian Deputy Prime Minister Alexander Novak suggested that OPEC+ could reconsider this decision if market imbalances arise. His comments provided some support to oil prices, which had dipped earlier in the week after the announcement of the production increase.

Saudi Arabia also adjusted its pricing strategy, lowering its April official selling price for Arab Light crude to Asia by 40 cents per barrel, marking the first reduction in three months. The price cut aligns with expectations as supply is set to rise, particularly with Russian and Iranian crude flows rebounding due to the increased use of non-sanctioned tankers.

Trade policy developments have further impacted oil markets. U.S. President Donald Trump delayed newly imposed tariffs on Canadian and Mexican goods under the USMCA until April 2. The delay provided temporary relief, but uncertainty remains over future trade measures. Meanwhile, the U.S. is considering expanding sanctions on Russian and Iranian energy exports, with Treasury Secretary Scott Bessent emphasizing efforts to severely restrict Iran’s crude shipments.

China’s crude oil imports fell by 5% year-over-year in January and February to 83.85 million tons, averaging 10.38 million barrels per day. The decline was attributed to U.S. sanctions limiting Russian and Iranian shipments, as well as a ban on sanctioned tankers at Shandong ports. However, imports are expected to rebound in March and April as refiners adjust to the new supply landscape.

Broader economic factors also played a role in oil price movements. The U.S. trade deficit widened in January due to a surge in gold imports, while productivity growth was revised up to 1.5% for Q4 2024. The labor market showed mixed results, with nonfarm payrolls increasing by 170,000 in February, slightly above expectations but below the three-month average of 237,000. The unemployment rate remained at 4.0%, and average hourly earnings rose by 0.3% month-over-month.

Financial markets reflected the uncertainty surrounding oil prices and trade policy. The S&P 500 was on track for a weekly decline of over 3%, while the U.S. dollar weakened against the yen and euro following the release of lower-than-expected payroll data.

Looking ahead, technical indicators suggest that U.S. oil prices are currently in a neutral range between $65.40 and $66.89 per barrel. A break above this level could push prices toward $68.18, while a move below $65.74 may indicate a drop toward $62.73.

Meanwhile, the U.S. is exploring a $20 billion initiative to refill the Strategic Petroleum Reserve, aiming to restore holdings to maximum capacity. The move aligns with President Trump’s strategy to enhance energy security after prior withdrawals from the reserve.

Overall, oil markets remain caught between supply increases, geopolitical tensions, and trade uncertainty, with prices responding to shifting policies and economic indicators. The coming weeks will be crucial in determining whether OPEC+ maintains its planned output boost and how global trade tensions evolve.

Prices in Review

Crude prices opened at $69.76 on Monday and saw fluctuations throughout the week, with the sharpest decline on Tuesday, when prices dropped to $66.85. The downward trend continued on Wednesday, reaching the weekly low of $65.96. However, prices rebounded on Thursday, climbing to $66.77. This morning, crude opened at $67.22, an overall decrease of $2.54 or 3.64%.

Diesel prices opened at $2.2995 on Monday and dropped on Tuesday, falling to $2.2492. Wednesday saw another decline to the weekly low of $2.2130. Prices rebounded on Thursday, rising to $2.2564, before edging down again on Friday at $2.2378, an overall decrease of 6 cents or 2.68%.

On Monday, gasoline opened at $2.2253, dropping on Tuesday to $2.1526. Prices continued downward on Wednesday, reaching the weekly low of $2.1187. A slight rebound followed on Thursday, with prices rising to $2.1289, before dipping again on Friday to $2.1249, an overall decrease of 10.04 cents or 4.51%.