Oil prices rally as US stockpiles drop

Oil prices rallied on Wednesday on surprisingly low US stockpiles, and WTI price rose from $60.3 to $62.8 per barrel. If oil prices retreat, they may encounter support near $55.1 per barrel, while resistance may be found near $65.0 per barrel.

US crude oil inventories released on Wednesday showed a small build in US crude stockpiles, boosting oil prices. The US Energy Information Administration reported a weekly crude stockpile build of 0.5M barrels for the week to April 11, after rising by 2.6M barrels the week before.

Concerns over possible US sanctions against Iran provided support for oil prices this week, even as the oil demand outlook worsened. US Energy Secretary Chris Wright warned on Friday that the US might impose sanctions on Iran's oil exports to put pressure on the country to end its nuclear program. His comments raised oil supply concerns, boosting oil prices. Over the weekend, representatives of the US and Iran discussed the issue of Iran’s nuclear program, and further talks between the two parties have been planned. 

The US Energy Information Administration (EIA) cut its oil demand forecast last week, causing oil prices to plummet. The EIA revised its oil demand outlook downwards, to reflect a rise by only 0.9 million barrels per day in 2025 from 1.2 barrels per day previously and 1 million barrels in 2026, from 1.2 barrels per day previously. In addition, OPEC+ has recently decided to raise oil output by 411K barrels per day in May. The EIA predicted that the combination of lower demand and increased OPEC+ output is likely to lead to an oversupply of oil in the second half of the year. 

Meanwhile, US President Donald Trump has been using threats of imposing trade tariffs as a negotiation tool to further his agenda with other countries. Trump’s tariffs may spark global trade wars and are causing turmoil in markets. Last week, Trump announced that he would pause tariffs for 90 days, against all countries, except China. 

The situation between the US and China is continuously escalating, with both countries announcing heavier tariffs against each other every day. The US raised tariffs on China to 145%, and China retaliated by increasing tariffs on US products to 125%. The potential of a trade war between China and the US is lowering the oil demand outlook, causing oil prices to plummet.  

Oil prices are kept in check by high central bank interest rates. The US Federal Reserve kept interest rates unchanged at its policy meeting in March. FOMC policymakers voted unanimously to maintain the federal funds rate at a target range of 4.25% to 4.50%. Markets are pricing in two more rate cuts this year, with the first rate cut in June, while a third rate cut is also considered possible.

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Written by:
Myrsini Giannouli

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