Oil Prices Dip Amid Trade War Concerns Despite U.S. Inventory Drawdowns

Oil prices edged lower on Thursday after a strong rally the previous day, as fears over escalating trade tensions and their potential impact on global economic growth outweighed bullish inventory data from the United States.

Brent crude futures slipped by 7 cents (0.1%) to $70.88 per barrel by 0107 GMT, while U.S. West Texas Intermediate (WTI) crude futures dropped 11 cents (0.2%) to $67.57 per barrel. This decline followed a 2% surge on Wednesday after U.S. government data revealed tighter-than-expected oil and fuel inventories.

According to the latest Energy Information Administration (EIA) report, U.S. crude stockpiles increased by 1.4 million barrels last week, a smaller build than the anticipated 2 million barrels. More significantly, U.S. gasoline inventories fell sharply by 5.7 million barrels—far exceeding analyst projections of a 1.9 million-barrel draw.

Distillate stockpiles also declined more than expected, adding to the positive market sentiment. Meanwhile, crude reserves in the U.S. Strategic Petroleum Reserve (SPR) climbed to their highest level since 2022.

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“Declining U.S. gasoline inventories raised expectations for a seasonal demand increase in spring, but concerns about the global economic impact of tariff wars weighed on the market,” said Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment. He noted that conflicting bullish and bearish factors are making it challenging for the market to establish a clear direction.

Adding to market uncertainty, U.S. President Donald Trump escalated trade tensions on Wednesday by threatening additional tariffs on European Union goods. Major U.S. trading partners have already signaled their intent to retaliate against existing trade barriers, heightening concerns over potential disruptions to global trade and energy demand.

With oil markets caught between supply-demand fundamentals and geopolitical uncertainty, volatility remains a key theme. Investors will closely monitor trade developments and economic indicators in the coming weeks to gauge the broader impact on energy markets. While seasonal demand trends may provide some support for prices, lingering trade concerns could keep a lid on further gains.