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Oil prices are facing downward pressure, following a drop in risk assets, as the Trump administration announced a base tariff of 10% on imports. WTI crude was down over 3%, falling below US$70 per barrel.
The tariffs will take effect on 5 April, with additional tariffs on specific partners beginning on 9 April. China will face a 34% tariff, while the EU will incur 20%, but Canada and Mexico are exempt, and oil and gas are not included in the tariffs.
Opec production outlook
OPEC+ is discussing adherence to production targets and plans to increase supply by 138,000 barrels per day this month. Some members must compensate for prior overproduction, which could offset planned supply increases.
The Energy Information Administration reported a 6.17 million barrel rise in US crude inventories, influenced by a 728,000 barrel per day decline in exports. Meanwhile, imports rose by 271,000 barrels per day, and refinery utilisation decreased by 1 percentage point to 86%.
Taken together, the movements in oil markets reflect a short-term shift in sentiment as geopolitical decisions filter through pricing mechanisms. The White House’s tariff announcement, landing just days ago, seemed to be the catalyst for broader risk-off behaviour in global asset markets. As we observed with the drop in WTI—down over 3% and sinking beneath the US$70 level—there is now less appetite for exposure to energy-linked positions, especially those with high sensitivity to global supply chains and macroeconomic policy.
From our perspective, these fiscal policy decisions are now weighing more heavily than typical demand-supply dynamics. Tariffs have not yet touched oil and gas directly, which might suggest limited short-term structural change to flows. However, perception matters. When global trade becomes less efficient, knock-on effects ripple through freight, transport, and industrial demand, indirectly impacting fossil energy products. Though Canada and Mexico remain outside these initial duties, the 34% levy placed on China and the 20% rate on the EU reshuffle cost expectations for global trade routes. For traders, this means pricing must look beyond inventories alone and account for margin pressures across key oil-importing economies.
Market response to tariffs
Parallel to this, discussions within OPEC+ circle back to the perennial theme of quota discipline. While on paper the announced 138,000 bpd supply increase looks modest, the reality depends on which members are actually able to lift production. We’ve seen before how past infractions—countries over-extending output during periods of price strength—lead to corrective underproduction later. These compensatory cuts may flatten any apparent additions, leaving actual flows relatively unchanged in real terms. If this plays out again in April, we may encounter a tighter-than-expected short-term balance, just as broader sentiment turns bearish.
Inventory data from the EIA strengthens the case for cautious positioning. A 6.17 million barrel gain is not just symptomatic of weaker export activity—it reflects complex logistics. The dip in exports by 728,000 bpd, paired with a rise in imports, looks like a reaction to weakening arbitrage opportunities. Demand signals from abroad are softening, possibly influenced by fears of tighter global trade conditions. Domestically, refineries eased back slightly, with utilisation ticking down by 1%, perhaps in anticipation of slower product demand or in response to narrower refining margins.
In this environment, we are steering away from assumption-led strategies. Instead, short-dated volatility instruments may offer favourable setups, allowing positioning around headline-driven risk, particularly as new trade policy milestones approach. Futures spreads may begin to reflect more pronounced contango conditions if inventories continue to build and OPEC+ increases underdeliver.
Finally, interactions between refined product demand, particularly in diesel and jet fuel, and broader macro indicators should be reviewed more closely. These areas tend to lead crude demand patterns and could give a better read on whether refinery run cuts are precautionary or structural.
In the coming sessions, reading the moves of both product cracks and freight rates could sharpen our view on the near-term direction—beyond what headline crude price changes imply.
