OIL prices fell about 2 per cent to a 12-week low on Monday (Mar 3) on reports Opec+ will proceed with a planned oil output increase in April and worries US tariffs could hurt global economic growth and oil demand.
Brent futures fell US$1.19, or 1.6 per cent, to settle at US$71.62 a barrel, while US West Texas Intermediate (WTI) crude fell US$1.39, or 2.0 per cent, to settle at US$68.37.
Those were the lowest closes for Brent since December 6 and WTI since Dec 9.
“Crude oil is under siege on multiple fronts and is vulnerable to the latest bearish headline or economic data,” Bob Yawger, director of energy futures at Mizuho, said in a report, pointing to the Opec+ decision, US manufacturing data, Ukraine peace talks and US tariffs.
The Organization of the Petroleum Exporting Countries (Opec) and allies like Russia, known as Opec+, decided to proceed with a planned April oil output increase, three sources from the producer group told Reuters on Monday.
Opec+ has been cutting output by 5.85 million barrels per day, equal to about 5.7 per cent of global supply, agreed in a series of steps since 2022 to support the market.
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Britain said several proposals had been made for a truce in fighting between Ukraine and Russia, after France floated a plan for a one-month pause leading to peace talks, but US President Donald Trump suggested his patience was running out.
The US, meanwhile, is drawing up a plan to potentially give Russia sanctions relief as Trump seeks to restore ties with Moscow and stop the war in Ukraine.
Russia is the third-biggest oil producer behind the US and Saudi Arabia and is a member of Opec+.
US tariffs
On the trade front, Trump will decide on Monday what levels of tariffs the US will impose early on Tuesday on Canada and Mexico amid last-minute negotiations over border security and efforts to halt the inflow of fentanyl opioids.
Trump has vowed to impose 25 per cent tariffs on all imports from Canada and Mexico, with 10 per cent on Canadian energy products.
Canada’s oilfield drilling and services sector was showing signs of slowing ahead of threatened tariffs.
Mexico’s President Claudia Sheinbaum said her country was ready for whatever decision Washington reached.
In response to US tariffs, China, the second-biggest economy after the US, said it was preparing countermeasures to tariffs targeting US agriculture.
US manufacturing was steady in February, but a measure of prices at the factory gate jumped to nearly a three-year high and it took longer for materials to be delivered, suggesting that tariffs on imports could soon undercut production.
Analysts have said Trump’s planned tariffs have also raised inflation worries at the US Federal Reserve. This could lead the Fed to keep interest rates higher for longer, which could slow economic growth and energy demand.
Worries about the impact of possible slowing economic growth on oil demand pressured WTI prices, which have declined by around 10 per cent over the past six weeks.
That prompted speculators last week to cut their net long US crude futures and options positions on the New York Mercantile Exchange and Intercontinental Exchange to their lowest level since hitting a record low in December 2023.
In other US energy markets, the start of the April contract as the new front month cut diesel futures down to a nine-week low towards the end of winter heating season. Gasoline futures soared to a six-month high ahead of the summer driving season. REUTERS
