OIL FUTURES: Crude falls further as markets brace for US tariffs; OPEC+ output rises

Crude oil futures continued their downswing in midmorning Asian trading March 4, amid renewed demand concerns ahead of the Trump administration's tariffs on key oil partners Mexico and Canada, while OPEC+ confirmed plans to raise oil output in April, citing "healthy market fundamentals", further adding to the global oil supply.

The front-month ICE Brent contract settled at three-month lows at $71.62/b at the March 4 close -- inching closer to the psychological $70/b level -- as overarching bearish sentiments weighed on market fundamentals. The contract last settled lower Dec. 6 at $71.12/b.

At 11:24 am Singapore time (0324 GMT), the ICE May Brent futures contract fell 43 cents/b (0.6%) day over day to $71.19/b, while NYMEX April light sweet crude contract fell 20 cents/b (0.29%) at $68.17/b from the previous close.

The US will impose a 10% tariff on energy imports from Canada and a 25% tariff on those from Mexico, both major crude suppliers to US refiners, the White House said March 3.

The new tariffs take effect March 4, according to advance notices published on the US Federal Register website.

The US will also impose an additional 10% tariff on goods from China, also set to take effect March 4.

The lower 10% tariff on energy imports from Canada was likely due to US refiners' reliance on Canadian crude, specifically in the Midwest.

"Asian stocks are gearing up for a rough open as global growth fears take center stage following Donald Trump's latest tariff grenade," SPI Asset Management's Managing Partner Stephen Innes said March 4.

Meanwhile, an impending trade war led investors to opt for a more cautious approach, amid reports of China's retaliatory actions.

"The stakes just got higher, and China isn't sitting idly by. Beijing's Communist Party-backed Global Times wasted no time firing back, reporting that Chinese officials are weighing a fresh round of retaliatory measures -- this time targeting US agriculture and food products," Innes said.

Hence, demand concerns continue to grow as increased protectionist measures weigh on oil fundamentals.

OPEC+ to taper production cuts in April

Eight OPEC+ countries will gradually ease their combined 2.2 million b/d of voluntary crude production cuts from April as planned, the OPEC secretariat said March 3, ending weeks of market speculation about the group's confidence in the global economy's stability to accommodate increased oil supplies.

The plans also include a gradual 300,000 b/d quota increase for the UAE, which has recently produced above its OPEC+ target.

In a statement, OPEC cited "healthy market fundamentals and the positive market outlook" after ministers from the eight countries -- Saudi Arabia, Russia, the UAE, Iraq, Kuwait, Algeria, Kazakhstan and Oman -- held a virtual meeting.

Since announcing its intentions in June 2024, the group has delayed raising output three times, and the reports appeared to dash hopes for a further extension of cuts.

"A statement on the group's website confirmed that they will go ahead with the increase of 138,000 b/d in April. It's the first in a series of monthly hikes to reverse 2.2 million b/d of voluntary cuts implemented more than two years ago by several key members of the alliance, including Saudi Arabia and Russia," ANZ research analysts, Brian Martin and Daniel Hynes, said.

The move to raise output is bearish for near-term global oil markets, said S&P Global Commodities Insights analysts James Bambino and Richard Joswick, and would likely pad an already significant supply overhang forecast for 2025.

The market consensus was for the group to postpone the restart, which had already been done three times since the agreement was struck in June 2024.

US crude oil inventories mount

Seasonal US crude oil inventory builds likely resumed during the week ended Feb. 28, analysts surveyed by Platts said March 3, amid an expected slowdown in refinery demand.

US commercial crude stocks likely climbed 1.3 million barrels to around 431.5 million barrels in the week to Feb. 28, analysts said.

More definitive numbers are due for release by the American Petroleum Institute later March 4 and the US Energy Information Administration March 5.

Dubai swaps

The May Dubai swap was pegged at $70.35/b at 10:00 am Singapore time (0200 GMT) March 4, retreating $1.68/b (2.33%) from the previous March 3 Asian market close.

The April-May Dubai swap intermonth spread was pegged at 52 cents/b, down 18 cents/b, while the May-June Dubai swap intermonth spread was pegged at 48 cents/b, lower 19 cents/b, over the same period.

The May Brent-Dubai exchange of futures for swaps was pegged at 73 cents/b, increasing 4 cents/b from the previous Asian close.