Oil prices slide after inventory surprise

[WORLD] Oil prices fell on Wednesday, May 14, 2025, after a surprise increase in U.S. crude inventories raised concerns about potential oversupply in the market. Brent crude futures declined by 0.6% to $66.24 per barrel, while U.S. West Texas Intermediate (WTI) dropped 0.6% to $63.31, following a significant 2.5% gain in the prior session.

U.S. Crude Inventories Rise Sharply

The unexpected surge in U.S. crude inventories was reported by the American Petroleum Institute (API), which indicated a 4.3 million barrel increase in stockpiles. This figure far exceeded analysts' expectations of a more modest 341,000-barrel rise. The U.S. Energy Information Administration (EIA) is expected to release official data later this week.

The API report also noted a build in gasoline and distillate stocks, further suggesting that consumer demand remains tepid as the U.S. transitions out of the winter season. Gasoline inventories rose by 2.1 million barrels, while distillates increased by 1.7 million barrels—both figures indicating sluggish downstream consumption. This trend could signal broader economic headwinds and reduced industrial activity, contributing to bearish sentiment in the energy markets.

The increase in inventories suggests that supply is outpacing demand, potentially leading to a glut in the market. This development has raised concerns among traders about the sustainability of current oil prices.

OPEC+ Output Increase Adds to Market Pressure

In addition to the rise in U.S. crude inventories, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) announced an increase in oil output by 138,000 barrels per day starting in April. While the increase is relatively small, it has raised concerns among traders that supply could outpace demand, especially as global economic growth faces uncertainty.

Several OPEC+ members, including Russia and Iraq, have signaled a willingness to continue moderate increases in output, citing the need to regain market share and balance fiscal budgets. However, internal divisions within the alliance remain, with some countries pushing for a more cautious approach amid volatile demand forecasts. The group is scheduled to reassess production targets at its next meeting in early June, where additional adjustments could be on the table.

Meanwhile, Chinese oil imports—a key driver of global demand—have shown mixed signals. Although Beijing reported a 3.2% year-on-year increase in April crude imports, analysts attribute much of the rise to stockpiling rather than end-user consumption. Ongoing weakness in China's property sector and muted manufacturing growth continue to weigh on energy outlooks in the region.

Market Outlook

Despite the recent dip, oil prices remain near two-week highs, supported by optimism over a temporary easing of U.S.-China trade tensions. Both countries agreed to reduce tariffs significantly, boosting expectations for future oil demand.

However, the unexpected rise in U.S. crude inventories and the increase in OPEC+ output have introduced new uncertainties into the market. Traders will be closely monitoring upcoming official inventory data and any further developments in global trade relations to assess the direction of oil prices in the coming weeks.

Analysts warn that any sustained dip in oil prices could prompt a response from U.S. shale producers, many of whom are operating at tight margins. If prices fall below breakeven thresholds, a pullback in U.S. output could help stabilize the market. Conversely, if prices remain resilient, the U.S. shale sector may continue ramping up production, exacerbating supply pressures.

As of the latest trading session, the United States Oil Fund (USO) was priced at $68.73, reflecting a slight decline of 0.0125% from the previous close.