Oil prices plunge to two-year lows as OPEC raises output

Oil prices plummeted on Wednesday, with WTI price plunging to $65.2 per barrel, its lowest value since April 2023. If oil prices retreat, they may encounter support near $63.7 per barrel, while resistance may be found near $71.2 per barrel.

Oil prices dipped this week after the Organization of the Petroleum Exporting Countries (OPEC) announced plans to raise oil output starting in April. The organisation has been using voluntary oil production cuts among its members to limit oil production and keep oil prices high. On Monday, however, the cartel announced that they would raise oil output by 2.2 million barrels a day starting from April, which drove oil prices down. 

Oil prices were also under pressure on Wednesday by an unexpectedly large US crude oil stock build. US crude oil inventories released on Wednesday showed that US crude stockpiles exceeded expectations. The US Energy Information Administration reported a weekly crude stockpile build of 3.6M barrels for the week to February 28, against expectations of a more modest build of 0.6M barrels and following a draw by 2.3M barrels the week before.

US President Donald Trump has been using threats of imposing trade tariffs as a negotiation tool to further his agenda with other countries. Trump has threatened that he will announce reciprocal tariffs on many countries, which would raise US import taxes to match those imposed by the country’s other trading partners. In his address to the US Congress early on Wednesday, Trump confirmed that he plans to impose reciprocal tariffs, which will take effect on April 2.

Trump’s tariff plans change rapidly causing confusion and volatility in markets. Trump’s plans of imposing 25% tariffs on Canada and Mexico had been postponed for a month after both countries agreed to tighten border activities. On Monday, however, Trump stated that he intends to go ahead with imposing tariffs on his neighboring countries and the tariffs against Canada and Mexico took effect on Tuesday. 

Trump’s tariffs may spark global trade wars and are causing turmoil in markets. The Canadian government has announced that they would implement 25% retaliatory tariffs on US imports starting on Tuesday. Trump escalated matters further, threatening Canada with increased reciprocal tariffs. Trump’s tariffs on Canadian energy products, which are Canada’s main export to the US, boosted oil prices on Tuesday.

US President Donald Trump’s plans to broker a peace treaty between Russia and Ukraine have so far been fruitless. On Friday, Trump had a heated meeting with Ukrainian President Volodymyr Zelenskyy in the White House. The clash confirmed that a peace treaty is not yet on the horizon, propping up oil prices. On Sunday, however, European leaders gathered to discuss the situation in Ukraine. British Prime Minister Keir Starmer stated that European leaders have agreed to draft a peace proposal between Russia and Ukraine and send it to Washington.

Oil prices are kept in check by high central banks’ interest rates. The US Federal Reserve held interest rates steady at its January meeting after delivering three consecutive rate cuts in 2024. FOMC policymakers voted unanimously to maintain the federal funds range to a target range of 4.25% to 4.50%.

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Written by:
Myrsini Giannouli

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