Oil News: Can OPEC Stand Firm Against Trump’s Demand for Higher Oil Output?

Did Rising Inventories and Refinery Activity Drag Markets Lower?

Crude oil markets faced renewed pressure this week as mixed inventory data from the Energy Information Administration (EIA) revealed bearish signals. U.S. commercial crude inventories fell by 1.0 million barrels, bringing total stockpiles to 411.7 million barrels, 6% below the five-year average. However, gasoline inventories rose by 2.3 million barrels, indicating softer demand despite colder-than-average winter weather.

Refinery inputs dropped sharply, averaging 15.5 million barrels per day, down 1.125 million barrels per day from the previous week. Gasoline and distillate fuel production also declined, with output at 9.2 million and 4.7 million barrels per day, respectively. Meanwhile, crude imports climbed by 621,000 barrels per day to 6.7 million barrels per day, further pressuring the supply-demand balance.

Last week, Light Crude Oil Futures are trading $74.66, down $2.73 or -3.53%.

Did Trump’s Policies Weigh Heavily on Sentiment?

President Donald Trump’s energy and trade policies added to bearish sentiment. His administration delayed tariffs on Canadian and Mexican imports, but the potential for 25% levies remains a concern for North American energy trade. Trump also accelerated domestic energy initiatives by reducing regulatory hurdles, raising fears of oversupply, with U.S. crude production at a record 13.46 million barrels per day.

At Davos, Trump challenged OPEC to lower oil prices by increasing production, warning that high prices could harm economic growth. His remarks raised questions about OPEC’s ability to sustain its cautious production cut strategy in the face of mounting pressure.

Is China’s Role as a Demand Anchor Weakening?

China, the world’s largest oil importer, sent mixed signals about its demand outlook. While it set a record for Russian crude imports at 2.17 million barrels per day, its overall crude imports fell 1.9% last year. Increased taxes on fuel imports have pressured smaller refiners, leading some to cut back on purchases, further raising concerns about China’s ability to support global oil demand.

Despite Beijing’s stimulus efforts, weak factory activity continues to dampen optimism. Analysts are cautious about the tangible impact of these measures on long-term oil consumption.

Could Winter Demand and Geopolitical Risks Provide Support?

Colder-than-average temperatures across the U.S. and Europe boosted heating oil demand, with distillate fuel product supplied rising 6.2% year-over-year. This seasonal demand has partially offset the bearish impact of rising gasoline inventories and reduced refinery activity.

Geopolitical risks also provided support, as U.S. sanctions on Russian oil exports targeted over 180 tankers and key producers. Analysts estimate these measures could remove up to 700,000 barrels per day from global markets. However, Russia’s discounted sales to China and India and shadow fleet operations have muted the immediate impact.

What’s Next for Crude Oil Markets?

Crude markets are expected to remain under pressure in the near term. Rising inventories, reduced refinery activity, and Trump’s policies continue to weigh on sentiment.

Technically, the trend is up, but the shift in momentum on the daily chart could spill into the weekly action. Firm resistance has been established at $79.44 to $80.00. However, the way of least resistance is down with $70.80 to $69.55 the primary target zone.

Winter demand and geopolitical risks may provide some stability, but OPEC’s response to Trump’s challenge will be pivotal. Traders should watch for inventory updates and any changes to OPEC’s strategy for further market direction. Overall, the outlook remains cautiously bearish.

More Information in our Economic Calendar.