Oil prices dropped Wednesday as geopolitical uncertainty intensified, sparked by U.S. President Donald Trump's initiative to incorporate Greenland into U.S. territory. This development overshadowed a cautiously optimistic assessment from the International Energy Agency (IEA) regarding global oil demand.
As of 06:00 ET (11:00 GMT), Brent crude futures for March delivery decreased by 0.4% to trade at $64.63 per barrel, while West Texas Intermediate (WTI) crude futures fell 0.5%, settling at $60.09 per barrel. The previous trading session had seen both contracts rise by approximately 1.5%, supported by stronger-than-forecasted Chinese economic growth figures.
The escalating tensions emerged from President Trump's intentions to claim Greenland—a self-governing Danish territory—which has unnerved international markets and cast doubts on the stability of the transatlantic U.S.–European Union alliance. In response to the dispute, the U.S. administration announced plans to implement tariffs starting at 10%, potentially increasing to 25%, on imports from eight European countries ahead of Trump's speech at the World Economic Forum in Davos scheduled for Wednesday.
European representatives have actively opposed these tariff threats, heightening the prospect of a wider trade conflict that could hinder global economic expansion and negatively affect oil consumption.
Despite the cautious market atmosphere, the IEA revised upward its forecast for global oil demand growth in 2026 in its latest monthly market report. The agency now anticipates a demand increase of 930,000 barrels per day (bpd) this year, a rise from the 860,000 bpd growth projected in its prior report. While the IEA still foresees that oil supply will substantially outpace demand in 2023, the surplus is expected to be narrower than what was indicated in the December outlook.
Market watchers remain attentive to forthcoming U.S. inventory updates, including the American Petroleum Institute's weekly crude oil and gasoline stockpile figures due later Wednesday and the Energy Information Administration's report scheduled for Thursday. These reports are delayed by one day this week due to a federal holiday on Monday.