The crude oil market faces a challenging environment characterized by rising OPEC+ supply, trade war uncertainty, and geopolitical risks tied to sanctions. The combination of an oversupplied market and weak investor sentiment keeps the oil outlook firmly bearish.

Crude Oil: Supply increase

The outlook for crude oil remains bearish, driven by a combination of rising OPEC+ supply and escalating trade tensions. OPEC+ has confirmed its plan to gradually increase oil production by 138,000 barrels per day (b/d) starting in April 2025, adhering to its strategy to unwind the 2.2 million b/d voluntary production cuts in a measured, flexible manner. This move has disappointed markets, which were hoping for a delay in the supply increase, causing oil prices to tumble to year-to-date lows. The market's reaction reflects growing concerns that the additional supply will exacerbate an already oversupplied market, reinforcing the bearish sentiment.

Further weighing on the oil market is the intensifying uncertainty surrounding trade tariffs. The Trump administration recently raised tariffs on China from 10% to 20% and moved forward with 25% levies on imports from Canada and Mexico. Although Canadian energy tariffs are set lower at 10%, the limited export capacity for Canadian crude means these tariffs will likely widen the discount on Canadian oil. This adds further downward pressure on crude prices, as Canadian producers struggle to find alternative markets for their oil.

The negative market sentiment has been compounded by the risk-off mood sparked by US-led escalations in the trade war. Speculative positioning in both WTI and Brent has declined in recent weeks, signaling that investors are stepping back from the oil market due to heightened volatility. There have been some suggestions that the Trump administration might consider tariff relief for Canada and Mexico, but the prevailing uncertainty keeps investors cautious.

On the sanctions front, the US has given Chevron until April 3 to wind down its operations in Venezuela. Chevron had previously held a license to operate in the country and export crude to the US, but with production expected to halt, around 200,000 b/d of supply is at risk. This poses a challenge for US refiners, who must now seek alternative sources of heavy crude, just as key suppliers like Canada and Mexico face trade barriers.

Crude Oil Daily Chart

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