Oil News: Traders on Edge as Inventory Builds and Tariff Threats Mount

Crude Oil Futures Test Key Support as Traders Eye Tariff Risks

Light crude oil futures are trading steady to weaker on Thursday, approaching critical technical levels. Prices are hovering near the January 9 minor low at $71.51, with key moving averages at $70.88 (200-day) and $70.53 (50-day) forming a crucial support zone. A bounce from these levels could attract new buyers, but a failure to hold the 50-day moving average risks triggering sell-stops, potentially fueling a sharp decline.

At 12:16 GMT, Light Crude Oil Futures are trading $72.54, down $0.08 or -0.11%.

Oil Prices Slip on Surging U.S. Crude Stockpiles

Crude oil prices have declined for a second straight day as U.S. crude inventories rose by 3.5 million barrels last week, exceeding analyst expectations of 3.2 million barrels. Refinery output cuts, driven in part by winter storms, contributed to the buildup, putting additional downward pressure on prices.

U.S. crude futures had already settled at their lowest level this year on Wednesday, signaling weaker near-term demand. Meanwhile, Brent crude also dipped as traders balanced inventory data against geopolitical uncertainties.

Trump’s Tariff Threats Cloud Market Outlook

Investor sentiment remains heavily influenced by potential U.S. trade actions against Canada and Mexico, the country’s top crude suppliers. The White House reaffirmed its plan to impose 25% tariffs unless the two nations take swift action to curb fentanyl smuggling. Market analysts believe some of this risk is already priced in, yet uncertainty remains regarding how these tariffs might impact crude flows and refinery economics.

John Evans, an analyst at oil broker PVM, noted that the oil market is “mesmerized” by the prospect of tariff announcements, expected after February 1. Any new trade restrictions could further disrupt North American crude supply chains and inject additional volatility into the market.

Russian Supply Disruptions Offer Some Support

Despite bearish U.S. inventory data, oil markets are finding some support from supply concerns related to Russia. New U.S. sanctions are tightening Moscow’s crude exports, with shipments from Russia’s western ports projected to fall by 8% in February as the country increases domestic refining. While this has not yet sparked a major price rebound, it limits downside risks and prevents deeper losses.

OPEC+ Meeting Looms Amid U.S. Production Surge

Traders are also watching the upcoming February 3 OPEC+ meeting, where the group will assess market conditions and discuss U.S. production policy. Trump has openly pressured OPEC—particularly Saudi Arabia—to lower oil prices, arguing that cheaper crude could help resolve the conflict in Ukraine. However, analysts believe an outright price war between OPEC+ and U.S. producers is unlikely, as both sides have an interest in maintaining stability.

Market Forecast: Bearish Sentiment Prevails, But Volatility Expected

Near-term sentiment remains bearish, with U.S. crude stockpiles rising and demand showing weakness. The ability of key technical support levels to hold will be a critical factor in price action.

If crude remains above $70.50, a technical bounce could emerge. However, a decisive break below this level could trigger a wave of selling, potentially driving prices sharply lower.

Traders should remain alert to tariff developments and the upcoming OPEC+ meeting, both of which could introduce fresh volatility.

More Information in our Economic Calendar.