US Crude Oil Inventories See Surprising Buildup, Oil Price Drops More Than 6 Percent

Higher inventory buildup indicates an oversupply in the market, which is bearish for prices.

Pump jacks used for gas and oil extraction are seen over the Monterey Shale formation in Lost Hills, Calif., on March 24, 2014. David McNew/Getty Images

Crude inventories in the United States showed an unexpected gain last week, which, together with other factors, contributed to pushing down oil prices.

For the week ending March 28, “U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 6.2 million barrels from the previous week,” the U.S. Energy Information Administration (EIA) said in an April 2 report. This far exceeded market expectations.

“At 439.8 million barrels, U.S. crude oil inventories are about 4 percent below the five-year average for this time of year,” the EIA said.

Inventory buildup can happen due to a decline in demand, a jump in production, or other factors. Rising inventory signals oversupply in the market or that people are using less fuel than usual, which puts downward pressure on prices.

Brent crude oil prices tanked on Thursday amid the unexpected jump in inventories. At the Intercontinental Exchange, June Brent crude futures were trading down by more than 6.3 percent at $69.40 per barrel as of 10:08 a.m. ET.

The U.S. crude oil stock buildup isn’t the only factor pressuring prices down. On Thursday, OPEC+ announced a higher-than-expected increase in planned supply additions.

In January, President Donald Trump said he would push Saudi Arabia and OPEC to boost oil production to put more downward pressure on prices.

The group had previously reduced crude oil output by 2.2 million barrels per day. Last December, OPEC+ members agreed to bring back this supply gradually from this year.

Originally, a single supply increment was scheduled for May. But on Thursday, OPEC+ announced that two more planned future monthly increments would be enacted in May.

As a result, the group expects 411,000 barrels per day of supply addition from next month. With a massive supply incoming, oil prices dropped.

Another key factor for falling oil prices is the latest tariff announcements by the Trump administration, which could turn out to be negative for oil demand.

On Wednesday, Trump unveiled a flat 10 percent tariff on all trade partners. Additional tariffs were also announced, with these charges different for each country based on the trade barriers they have imposed on the United States.

The Trump administration’s new tariff regime is expected to boost the U.S. manufacturing sector and create more jobs within the country.

In an April 3 S&P Global report, analysts at the company’s Commodity Insights division said they “see this level of tariffs and a looming trade war as bearish for the global economy and oil demand and thus bearish for Platts Dated Brent,” which is a benchmark for light North Sea crude oil.

“In a pessimistic scenario, where trade wars escalate and are compounded by other adverse factors such as geopolitical conflicts and inflation, S&P Global Market Intelligence estimated that global GDP growth would be downgraded by roughly 1 percent, leading to a reduction in oil/liquids demand growth by half a million b/d in 2025,” they added.

Meanwhile, retail gas prices across the United States have risen from $3.12 per gallon for the week ending Dec. 30 to $3.28 for the week ending March 31, an increase of more than 5 percent so far this year.

However, national average gas prices are now lower year over year, with regular gas priced at $3.26 on April 3, down from $3.54 a year ago, according to data from consumer services company AAA. This is a decline of 7.9 percent.

Oil Outlook

In its March 11 short-term energy outlook, the EIA said it expects global oil markets to remain “relatively tight” through the middle of the year, followed by inventory buildup in the later part of 2025.

Global inventories are predicted to decline in the second quarter, partly due to falling output in Venezuela and Iran, as a result of which Brent crude oil spot price is expected to rise to $75 per barrel by the third quarter, according to the agency.

“However, we expect oil inventories will build and place downward pressure on crude oil prices in late-2025 and through 2026 when we expect OPEC+ unwinds production cuts and non-OPEC oil production grows,” it said.

“As a result, we forecast the Brent crude oil price will fall to an average of $68/b in 2026.”

A March report from the International Energy Agency attributed the decline in crude oil prices in February and early March to concerns about the outlook of the economy and global oil demand amid trade tensions and OPEC+ reversing its production cuts.

“Nevertheless, global oil demand growth is still expected to average just over 1 mb/d this year, up from 830 kb/d in 2024, boosted in part by lower oil prices. Asian countries will account for almost 60 percent of gains, led by China,” the report reads.