Trump Tariffs, U.S. Stock Build Contribute To Another Plunge In Oil Prices

But one analyst says bearish sentiment is way out of line with fundamentals reality: File Image/Pixabay

Washington’s implementation of its long-threatened tariffs against Canada and Mexico had the expected effect on crude trading Wednesday, with prices settling down more than 2 percent due to demand concerns.

Brent settled down $1.74, or 2.4 percent, to $69.30 per barrel, while West Texas Intermediate settled down $1.95, or 2.8 percent, to $66.31 per barrel.

The price drop was also propelled by U.S. crude stocks rising more than expected in the week ending February 28, by 3.6 million barrels to 433.8 million barrels compared with expectations for a 341,000-barrel increase; traders ignored the fact that gasoline and distillate inventories fell during the same time period, according to the Energy Information Administration.

At least one analyst expressed frustration with what he regarded as bearish market sentiment taken way too far.

Eric Nuttall, partner and senior portfolio manager at Ninepoint Partners, told  media that “I think sentiment right now is literally as low as it was during the COVID-19 demand shock of 2020.

“When we look at energy stocks, we had 25 stocks make 52-week lows yesterday, volumes well above average, relative strength indicators – a measurement of how oversold stocks are – again are back to Covid lows....sentiment today is extremely challenged and extremely fragile.”

Nuttall went on to say that global oil inventories are near their lowest levels in recorded history, and this combined with slow U.S. shale production should support higher crude prices; he added that “it is critically important for investors to take a pause, take a breath, and reflect on current fundamentals.”

In other oil news on Wednesday, the Energy Information Administration warned that refinery closures on top of growing demand for gasoline, diesel, and jet fuel are about to start squeezing available volumes to a chronic extent next year, plunging inventories to the lowest levels since 2000.

Also, data from the Russian Finance Ministry revealed that Russia’s oil and gas budget revenues dropped by 18.4 percent in February from a year earlier, to $8.6 billion (771.3 billion Russian rubles) from oil and gas, down from $10.6 billion (945.6 billion rubles).

Russia has signalled it would seek to reduce its dependence on oil in order to minimize the impact of volatile oil and gas prices on its budget revenues.