Oil Prices Edge Higher on Weaker Dollar, But Tariff Concerns Limit Gains
Oil prices rose slightly on Wednesday, supported by a weaker U.S. dollar, but gains were capped by mounting fears of an economic slowdown in the U.S. and concerns about the impact of tariffs on global economic growth.
Brent crude futures climbed 37 cents (0.53%) to $69.93 per barrel at 09:51 GMT, while West Texas Intermediate (WTI) crude futures gained 37 cents (0.53%) to $66.62 per barrel.
Weaker Dollar Supports Oil, Economic Fears Cap Upside
According to UBS analyst Giovanni Staunovo, oil prices have recently found support due to the weakening U.S. dollarand a shift in the Energy Information Administration’s (EIA) stance, which no longer expects a significantly oversupplied oil market this year.
On Tuesday, the U.S. dollar index dropped by 0.5% to a new 2025 low, making crude more affordable for buyers using other currencies. Typically, a weaker dollar increases demand for commodities priced in dollars, as they become cheaper for foreign buyers.
“The weaker dollar counters the bearish bias from global economic slowdown, but this effect is likely to be short-lived,” said Priyanka Sachdeva, a senior market analyst at Phillip Nova.
U.S. Recession Fears and Trade Tariffs Weigh on Market Sentiment
The U.S. stock market experienced further losses on Tuesday, deepening the biggest selloff in months, as investors grew increasingly concerned over higher tariffs on imports and declining consumer confidence.
“Fears of a U.S. recession, weakness in stock markets, and the impact of tariffs on key oil-consuming nations like China are adding uncertainty to the market. These factors could continue to fuel bearish sentiment, keeping oil prices in check,” said Hassan Fawaz, chairman and founder of brokerage firm GivTrade.
President Donald Trump’s economic policies have been largely focused on a wave of tariff announcements, some of which have already taken effect, while others are scheduled to be implemented later. Markets worry that tariffs could increase costs for businesses, fuel inflation, and weaken consumer confidence, ultimately damaging economic growth.
Over the weekend, Trump stated that a “transition period” was likely and declined to rule out the possibility of a U.S. recession. Investors are now eagerly awaiting Wednesday’s U.S. inflation data, which could provide clues about the Federal Reserve’s next move regarding interest rates.
OPEC+ Plans Production Increase, U.S. Oil Output Hits Record Levels
The OPEC+ alliance has announced plans to increase oil production in April, which is another factor limiting crude price gains. This decision adds further uncertainty to a market already grappling with concerns over U.S. trade policies.
“Overall market sentiment remains fragile despite today’s slight rebound,” noted Yeap Jun Rong, a market strategist at IG.
“For now, oil market sentiment is likely to remain muted, with tariff developments lacking clarity and persistent concerns over U.S. economic risks,” Yeap added.
On the supply side, U.S. crude oil production is expected to surpass previous estimates, reaching an average 13.61 million barrels per day in 2025, according to the Energy Information Administration (EIA).
U.S. Crude Inventories Rise, Gasoline Stockpiles Drop
Market participants are now awaiting Wednesday’s government report on U.S. crude stockpiles, which could influence oil price trends.
Data from the American Petroleum Institute (API) showed that U.S. crude oil inventories rose by 4.2 million barrelsin the week ending March 7, while gasoline stockpiles declined by 4.6 million barrels.
This suggests that oil supply is increasing, which could exert downward pressure on prices, while the drop in gasoline inventories indicates potentially recovering demand for fuel.
Oil Price Outlook Remains Uncertain
Despite the current rebound, oil prices remain under pressure from trade risks, U.S. recession fears, and expected production increases. Key factors that could shape the market direction include Wednesday’s U.S. inflation data and further decisions from OPEC+.
If signs of economic weakness in the U.S. intensify and OPEC+ follows through with its planned output increase, oil prices could decline further. However, if inflation data surprises on the upside and oil production growth slows, prices may stabilize at higher levels.
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