By Georgina McCartney
HOUSTON (Reuters) -Global benchmark Brent was down nearly 3% on Wednesday, recovering slightly from a three-year low hit earlier in the session, after U.S. crude oil stockpiles posted a larger-than-expected build, adding a further headwind as investors worried about OPEC+ plans to increase output in April and U.S. tariffs on Canada, China and Mexico.
Brent futures were trading $1.82, or 2.6%, lower at $69.22 a barrel by 12:59 p.m. EST. (1759 GMT). U.S. West Texas Intermediate crude (WTI) fell $2.06, or 3%, to $66.20 a barrel.
Prices pared some losses after hitting multi-year lows earlier in the session – Brent sank to $68.33, its lowest since December 2021, and U.S. crude futures touched $65.22, its lowest since May 2023.
They recovered slightly after the U.S. Commerce Department chief, Howard Lutnick, said Trump would make the final decision on whether to grant any relief to certain industries on Bloomberg TV.
While Lutnick said the 25% tariff levied on Canada and Mexico would remain, the relief under consideration would eliminate the 10% tariff on Canadian energy imports, such as crude oil and gasoline, which comply with the rules of origin under the U.S.-Mexico-Canada Agreement, a source familiar with the discussions said.
U.S. crude stockpiles rose more than expected last week amid seasonal refinery maintenance, while gasoline and distillate inventories fell due to a hike in exports, the Energy Information Administration said.
Crude inventories rose by 3.6 million barrels to 433.8 million barrels in the week, the EIA said, far exceeding analysts’ expectations in a Reuters poll for a 341,000-barrel rise.
Brent fell more than $2 after the data was released.
“The imposition of tariffs on China, Canada and Mexico by the U.S. sparked swift reprisals from each nation that increased concerns over a slowdown in economic growth and the consequent impact on energy demand,” Ashley Kelty, an analyst at Panmure Liberum, said.
Canada and China retaliated immediately against Trump’s tariffs on Tuesday, and Mexican President Claudia Sheinbaum said the country would respond, without giving details.
JP Morgan analysts said a 100-basis-point slowdown in the U.S. GDP growth rate could potentially reduce global oil demand growth by 180,000 bpd, analysts said in a note.
OPEC+, the Organization of the Petroleum Exporting Countries and allies including Russia, decided on Monday to increase output for the first time since 2022, pressuring crude prices.
The group will make a small increase of 138,000 barrels per day from April, the first step in planned monthly increases to unwind its nearly 6 million bpd of cuts, equal to almost 6% of global demand.
“There is a bit of a concern in the market that the OPEC+ decision is the start of a series of more monthly supply additions, but the statement from OPEC+ reiterates an approach in bringing back barrels only if the market can absorb them,” UBS analyst Giovanni Staunovo said.
Analysts at Morgan Stanley Research said it was possible OPEC+ would deliver only a few monthly increases, rather than fully unwind the cuts.
The Trump administration also said on Tuesday it was ending a license that Washington granted to U.S. oil producer Chevron since 2022 to operate in Venezuela and export its oil.
The decision puts 200,000 bpd of supply at risk, ING commodities strategists wrote in a note on Wednesday.
Meanwhile, JP Morgan analysts said global oil demand last month averaged 103.6 million bpd, marking a year-over-year increase of 1.6 million bpd, but falling short of their projected 1.8 million bpd rise for the month.
(Reporting by Georgina McCartney, Arathy Somasekhar, Jeslyn Lerh and Arunima Kumar; Editing by David Gregorio and Marguerita Choy)
