West Texas Intermediate (WTI) crude oil prices experienced a significant decline, falling approximately 2.5 per cent in their largest drop since January.
This downturn comes after three consecutive days of gains and is partially attributed to the latest report from the US Energy Information Administration (EIA).
The EIA report revealed an unexpected increase in U.S. crude inventories of 4.1 million barrels, bringing total stockpiles to 427.9 million barrels.
This buildup follows last week’s report, which showed the largest inventory surge since February 2024, with an additional 8.6 million barrels.
These figures suggest that supply is outpacing demand in the short term, exerting downward pressure on prices.
However, a decrease in gasoline inventories — down by three million barrels — and distillate products has provided slight support to the market, partially offsetting the negative effect of rising crude stockpiles.
The market also witnessed a sharp drop in oil imports, which fell to 6.3 million barrels per day, down 606,000 from the previous week.
If this trend continues, oil-exporting countries like Colombia could face challenges due to weaker external demand.
Beyond supply and demand dynamics, the inflationary outlook in the U.S. has influenced market sentiment.
Higher-than-expected inflation data reinforce expectations of a more aggressive stance from the Federal Reserve, which could keep borrowing costs elevated and put additional pressure on dollar-denominated commodities.
Recent geopolitical developments have also played a role in the oil price decline.
Remarks from President Donald Trump regarding potential negotiations with Russia to end the war in Ukraine have fuelled speculation about a possible easing of restrictions on Russian oil producers.
If this materialises, it would reduce supply risks from Russia and contribute to bearish pressure on crude prices.
Looking ahead, the EIA has raised its U.S. crude oil production estimate for 2025 to 13.59 million barrels per day, adding another supply-side factor to consider.
The agency forecasts that the Brent crude oil price will average US$74 per barrel in 2025, dropping to US$66 per barrel in 2026, compared with US$80 per barrel in 2024.
In this context, oil prices remain under pressure, reflecting a mix of geopolitical developments, monetary policy adjustments, and growing signs of oversupply in the market.
As the situation continues to evolve, market participants will closely monitor inventory levels, production estimates, and geopolitical developments for further guidance on price direction.
