USO Plunges 4% as Trump De-escalation Talk and Inventory Build Cool Oil Rally

The 'Trump Pivot' Deflates the War Premium

The primary driver behind today's sharp reversal in the United States Oil Fund (USO) was a series of cooling comments from President Donald Trump. Earlier in the session, oil markets were in a state of near-panic as Brent crude briefly touched $119 per barrel and West Texas Intermediate (WTI) cleared the $101 mark. This spike followed reports that Iran had intensified attacks on energy infrastructure in the Persian Gulf, including significant damage to Qatar’s Ras Laffan LNG complex and the UAE’s Habshan gas processing facility.

However, the momentum shifted abruptly when President Trump stated Thursday afternoon that the U.S. is "not putting troops anywhere" and confirmed he had advised Israeli Prime Minister Benjamin Netanyahu to avoid further strikes on Iranian oil and gas fields. These comments effectively signaled a desire to avoid a full-scale regional war, prompting traders to immediately price out the "extreme escalation" premium that had been baked into futures contracts over the last 48 hours.

EIA Inventory Shock Adds Fundamental Pressure

While geopolitics dominated the headlines, a stark fundamental report from the Energy Information Administration (EIA) provided the bearish floor for the afternoon sell-off. The EIA reported a massive 6.2 million barrel build in U.S. commercial crude inventories for the week ended March 13. This figure stood in sharp contrast to analyst expectations, which had called for a modest build of only 383,000 barrels.

The inventory data suggested that despite the chaos in the Middle East, domestic supply remains robust, bolstered by a surge in imports from Venezuela and Mexico, which hit their highest levels since late 2024. "This crude stock build would certainly be more bearish if there was not so much else going on," noted John Kilduff, partner at Again Capital. The combination of rising domestic stockpiles and a cooling geopolitical temperature left USO vulnerable to the 4.31% slide seen today.

SPR Discussions and Technical Reversals

Adding further pressure were comments from Treasury official Scott Bessent regarding the Strategic Petroleum Reserve (SPR). Discussions surrounding the potential strategic use of the reserve to quell price volatility added a layer of institutional selling pressure. From a technical perspective, USO’s failure to hold the $120 level earlier in the week led to a "double top" formation, with the Relative Strength Index (RSI) showing a bearish divergence as prices retreated from overbought territory.

As of 3:38 PM ET, USO is trading at $116.42, significantly underperforming the S&P 500, which remained flat at +0.07%. The widening spread between Brent and WTI—now at its largest in 11 years—highlights a market where international supply risks are being partially offset by a glut of crude flowing through U.S. pipelines. Looking forward, investors will be watching for any signs of a breakdown in the OPEC+ production freeze, though the group currently maintains its pause through the end of March.