Oil: Downward Pressure and Volatility Due to Inventories and Geopolitical Tensions

Market Analysis by Quasar Elizundia, Expert Research Strategist at Pepperstone

– March 19, 2025 – 

“The oil market has experienced volatility in recent days, facing conflicting forces that keep traders under uncertainty. West Texas Intermediate (WTI) futures are trading around $67 per barrel, following an unexpected increase in U.S. inventories and concerns about the global economic outlook, counterbalanced by geopolitical factors in the Middle East and Eastern Europe.

According to the latest weekly report from the Energy Information Administration (EIA), U.S. crude inventories rose by 1.7 million barrels, a figure that surprised the market, generating downward pressure. This increase reflects a temporary weakening in domestic demand, heightening concerns among investors about a potential economic slowdown.

However, a significant decline in refined product stocks could provide short-term support for prices. Gasoline inventories fell by 0.5 million barrels, while distillates dropped by 2.8 million. This contraction indicates a tight energy market in key segments, which could limit further price declines.
The sustained reduction in crude imports also emerges as a relevant factor. Imports stood at 5.4 million barrels per day, marking an 11% year-over-year decline over the past four weeks. This drop reflects a strategic adjustment by U.S. importers, possibly anticipating fluctuations in global supply.

On the geopolitical front, tensions in the Middle East remain a critical factor that could significantly impact oil prices. Any escalation in regional conflicts threatens to disrupt supply chains and create sudden upward pressure in international markets.

Additionally, the situation between Russia and Ukraine presents new complexities. Russian President Vladimir Putin recently rejected a general ceasefire but accepted a U.S.-backed proposal to temporarily halt attacks on energy infrastructure. This potential truce could facilitate the eventual return of Russian oil to international markets, influencing global supply.

Finally, investor attention is also focused on the upcoming Federal Reserve decision and Jerome Powell’s statements, as well as the growing uncertainty caused by trade tensions under the Trump administration. These factors will continue to contribute to oil price volatility in the coming weeks.”