Oil prices declined on Wednesday as expectations of rising U.S. crude inventories outweighed the impact of a temporary production shutdown at two major oil fields in Kazakhstan, while geopolitical pressure linked to U.S. tariff threats over Greenland added to market caution.
Brent crude futures dropped 97 cents, or 1.5%, to $63.95 a barrel by 07:45 GMT. U.S. West Texas Intermediate (WTI) crude also weakened, falling 78 cents, or 1.3%, to $59.58 a barrel.
The pullback followed gains in the previous session, when both benchmarks climbed nearly $1 a barrel after Kazakhstan halted output at the Tengiz and Korolev oil fields on Sunday due to power distribution problems. Optimism driven by stronger-than-expected Chinese economic data had also supported prices earlier in the week.
Industry sources told Reuters that production at the two Kazakh fields could remain offline for another seven to ten days. However, analysts cautioned that the disruption is temporary and unlikely to offset broader bearish factors.
According to IG market analyst Tony Sycamore, downward pressure from an anticipated increase in U.S. crude inventories, combined with ongoing geopolitical tensions, is expected to persist despite the supply outage at Tengiz—one of the world’s largest oil fields—and Korolev.
Additional pressure on oil markets has come from renewed trade tensions after U.S. President Donald Trump warned of new tariffs on European countries if negotiations over U.S. control of Greenland fail. Such tariffs could weigh on global economic growth and, in turn, reduce energy demand. Trump reiterated on Tuesday that there was “no going back” on his objective regarding Greenland.
Market participants are also closely watching U.S. inventory data. A preliminary Reuters poll showed that U.S. crude oil and gasoline stockpiles likely increased last week, while distillate inventories were expected to decline. Analysts surveyed estimated that crude inventories rose by an average of 1.7 million barrels in the week ending January 16.
Weekly inventory figures from the American Petroleum Institute are due later on Wednesday, followed by official data from the Energy Information Administration on Thursday, both delayed by a U.S. federal holiday earlier in the week.
While rising inventories would typically weigh on prices, Gregory Brew, senior analyst at Eurasia Group, noted that the potential for renewed U.S.-Iran tensions could provide upside support for oil. Trump recently threatened military action against Iran following its violent crackdown on anti-government protests.
Iranian media reported that any attack on Supreme Leader Ayatollah Ali Khamenei would prompt a declaration of jihad. Brew warned that even without immediate military action, tensions are likely to remain elevated as U.S. forces increase their presence in the Middle East and diplomatic efforts fail to gain traction.
