MW Oil prices end lower on plans for OPEC+ output hike and Trump's tariffs

By Myra P. Saefong and William Watts

Strong China data fail to offer support to prices

Oil futures ended lower Monday after the major producers known as OPEC+ said they will boost output starting in April, and as President Donald Trump's planned tariffs on imports from Canada and Mexico threatened to slow demand for energy.

Traders also weighed prospects for a Ukraine peace deal after Friday's public clash between Trump and Ukrainian President Volodymyr Zelensky in the Oval Office. Prices for oil, meanwhile, failed to find support from an improvement in Chinese economic data.

Price moves

-- West Texas Intermediate crude CL00 for April delivery CL.1 CLJ25 fell $1.39, or 2%, to settle at $68.37 a barrel on the New York Mercantile Exchange, after posting a sixth straight weekly decline on Friday.

-- May Brent crude BRN00 BRNK25, the global benchmark, lost $1.19, or 1.6%, at $71.62 a barrel on ICE Futures Europe.

-- April gasoline RBJ25 shed 1.6% to $2.19 a gallon, while April heating oil HOJ25 fell 2.4% to $2.26 a gallon.

-- Natural gas for April delivery NGJ25 settled at $4.12 per million British thermal units, up 7.5% after last week's 7.1% loss.

Market drivers

The Organization of the Petroleum Exporting Countries and its allies "want to appease Trump but if you look under the hood, we feel they want to recapture market share they have lost," Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch. That's especially given the "rumblings of a growth scare, [economic] stagnation, job losses [in the U.S.], and maybe even a recession on the horizon."

OPEC+ on Monday said it would go ahead with its plan to boost production starting April 1 by gradually unwinding its voluntary production cuts of 2.2 million barrels per day.

The group also said it would remain "adaptable to evolving conditions" so the gradual increase "may be paused or reversed subject to market conditions."

Phil Flynn, senior market analyst at the Price Futures Group, said that Saudi Arabia wanted to delay the production increase even longer, but Russia and the United Arab Emirates were against that. "Perhaps Donald Trump broke the stalemate, pressuring the Saudis to increase output," he said.

In late January, Trump had called on OPEC+ to increase production and lower oil prices.

While the oil market has reacted to the OPEC+ announcement, the reaction in prices may be bigger than the real increase in overall oil production that the market will see, said Flynn. If the U.S. enforces sanctions on Iran and if Iraqi crude from the Kurdish region doesn't start flowing, the market may not notice the OPEC+ output hike, he said.

Meanwhile, crude prices found little support from "better economic data from China, which showed manufacturing activity expanded at its fastest pace in three months in February," Alex Hodes, director of energy-market strategy for StoneX, said in Monday's newsletter. Still, the data offer "signs of optimism about oil demand."

A private gauge of manufacturing activity in China, the Caixin purchasing managers' index, rose to 50.8 in February from 50.1 in January, the strongest reading since November and a sign of marginally accelerating activity.

Oil prices are sensitive to China data because the country is the world's largest crude importer, but optimism around the data may have been blunted by broader economic worries.

The cost of supplies for U.S. manufacturers jumped in February to more than a two-and-a-half-year high of 62.4% in February, data released Monday showed. The manufacturing index of the Institute for Supply Management was at 50.3%, barely holding in positive territory for a second month in a row.

Trump said last week he would impose an additional 10% tariff on imports from China starting Tuesday, on top of a 10% levy imposed last month and in addition to those enacted during his first term.

"Trump's rising tariffs will test Beijing's ability to sustain that momentum," said Hodes. "Policymakers in China are expected to meet this week to discuss China's official budget-deficit target, where they are expected to pump trillions of yuan into a system battling deflation, a property crash and now a trade war with the U.S."

The oil market is also bracing for U.S. tariffs on Canada and Mexico, which are set to to take effect on Tuesday. They are expected to include a 10% tariff on U.S. oil imports from Canada.

Read: This is why Trump's Canada-Mexico tariffs threaten a spike in gasoline prices

Oil ended lower on Friday as crude futures booked February losses, with the decline accelerating late in the session after the Oval Office meeting between Trump and Zelensky.

See: Zelensky says Ukraine still 'ready' for minerals deal with U.S. after Oval Office blowup with Trump

Also read: Why Trump's move to boost the U.S. copper market is a 'pipe dream' that could raise prices

The clash sparked a brief selloff for stocks and other assets viewed as risky, including crude - though over the longer term, diminished prospects of a deal to end the fighting following Russia's 2022 invasion of Ukraine are seen as supportive for oil prices. Prospects for an agreement have been seen as bearish for crude if they lead to the relaxation of sanctions on Russia's energy sector.

See: 'Shocked' reaction to White House Zelensky meeting sends Europe defense stocks soaring

-Myra P. Saefong -William Watts

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March 03, 2025 15:25 ET (20:25 GMT)

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