The intensifying trade war between China and the U.S., coupled with OPEC+ preparing to unwind its production cuts, is exerting significant downward pressure on oil prices. The U.S.-China trade conflict escalated recently as the White House approved an additional 10% tariff on Chinese imports, bringing the total to 20%. Meanwhile, postponed tariffs on Canada and Mexico took effect on March 4. Canadian crude exports to U.S. Midwest refiners now face a 10% tariff, likely increasing gasoline prices by 2-3%. Mexico’s 25% tariff will push Gulf Coast refiners to seek alternative sources for heavy crude. Canada retaliated by imposing 25% tariffs on approximately $30 billion worth of U.S. imports, with the potential for further levies targeting $125 billion in 21 days. Ontario has also threatened to halt electricity exports to the U.S. Discounts on Canada’s key export grade WCS widened significantly this week, trading at -$14 per barrel relative to the prompt WTI futures contract, matching levels seen a month ago.
Market developments include Shell considering the sale of chemical assets in Europe and the U.S., including the Deer Park plant. ADNOC merged its polyolefin assets with OMV, creating a $60 billion petrochemical entity. Var Energi discovered 15-45 MMboe of oil in Norway’s Barents Sea.
On March 4, 2025, OPEC+’s plan to unwind production cuts intensified market concerns, causing oil prices to slump. ICE Brent dropped $4 per barrel this week, hovering near $70 per barrel. The U.S.-China trade war overshadowed tariff impacts on Canada and Mexico. Speculators increased short positions on WTI Nymex crude futures by 20%, reaching 133,000 contracts, while long positions remained stable at 330,000 lots.
Chinese LNG demand fell to its lowest since February 2020 due to warm weather, high stock levels, and weak manufacturing growth, allowing Japan to become the largest LNG importer. Equinor’s Johan Castberg project faced further delays due to adverse weather. Pemex reported a $9.1 billion Q4 2024 loss amid declining production and rising debt. Kazakhstan exceeded its OPEC+ quota, producing 2.12 million b/d. Libya announced its first upstream auction since 2007, seeking $3-$4 billion to boost output. Ecuador transferred operations of its Sacha field to a Sinopec-led consortium. Iron ore futures declined for seven consecutive sessions amid U.S.-China trade tensions. India demanded $2.81 billion from Reliance Industries over gas migration disputes. Saudi Aramco cut its 2025 dividend by 30%. Chinese copper smelters prioritized market share despite squeezed margins. Iraq negotiated initial Kurdish oil volumes but sought third-party oversight for future transactions.
— news from OilPrice.com