By Nicole Jao
(Reuters) -Oil prices fell more than 2% on Wednesday as a large build in U.S. crude and gasoline stockpiles signaled weaker demand, while worries about a new China-U.S. trade war fueled fears of softer economic growth.
Brent crude futures settled down $1.59, or 2.09%, to $74.61 a barrel. U.S. West Texas Intermediate crude was down $1.67, or 2.3%, to $71.03.
U.S. crude oil inventories rose sharply last week, the Energy Information Administration said on Wednesday, as refiners facing soft gasoline demand did maintenance work.
"Refiners just don’t have a call for crude right now," said John Kilduff, a partner at Again Capital in New York. "They’re racing into maintenance, given the slack demand we’re seeing for gasoline," he added.
Concern over a new trade war between the U.S. and China, the world’s largest energy importer, also pressured prices.
On Tuesday, China announced tariffs on imports of U.S. oil, liquefied natural gas and coal in retaliation for U.S. levies on Chinese exports, pushing WTI down 3% at its session low, the lowest since Dec. 31.
"China putting a tariff on U.S. imports reduces the demand for those commodities, which need to be redirected into another market," said Andrew Lipow, president of Lipow Oil Associates.
On Wednesday, Iran’s President Masoud Pezeshkian urged OPEC members to unite against possible U.S. sanctions, after Trump said he would restore the "maximum pressure" campaign on Iran that he enacted in his first term.
Trump drove Iran’s oil exports to near zero during part of his first term after reimposing sanctions to curtail the country’s nuclear program.
"Should these sanctions be reimposed, the resulting supply squeeze could sustain the upward momentum in oil prices, particularly amid slower than expected supply adjustments from OPEC+ producers," said Ahmad Assiri, research strategist at brokerage Pepperstone.
Tehran’s oil exports brought in $53 billion in 2023 and $54 billion a year earlier, according to EIA estimates. Output during 2024 was running at its highest level since 2018, based on OPEC data.
"The oil market is now caught between increasing fears that an escalating trade war will damage global oil demand growth on the one hand and possible sudden disruption of Iranian oil exports," said Bjarne Schieldrop, chief commodities analyst at SEB.