WTI Rises Above $61 as Trade War Fears Ease
- Oil prices are climbing, reaching almost $61.30 on the NYMEX exchange, fueled by hopes that the trade tensions between the US and China might be contained.
- President Trump has escalated the trade dispute with China by raising tariffs to a significant 145%.
- Adding a positive note, US official Hassett has confirmed some progress in trade discussions with the EU.
West Texas Intermediate (WTI) crude oil futures on the NYMEX exchange saw a boost to nearly $61.30 during Monday’s North American trading session. This rise in oil prices comes as concerns about a widespread global trade war seem to be easing. Market watchers are now anticipating that the trade conflict will primarily remain focused on the United States (US) and China.
The financial markets appear more optimistic about a potentially less damaging trade war, largely due to President Trump’s announcement of a 90-day timeout on implementing reciprocal tariffs on most trading partners, excluding China. Further adding to this sentiment, Kevin Hassett from the US National Economic Council (NEC) mentioned in a Fox Business Network interview that “enormous progress” is being made in tariff negotiations with the European Union (EU).
However, last week saw President Trump maintain tariffs on Chinese goods and even increase them to 145%, which included duties on Fentanyl, as a response to what he considers reciprocal tariffs. China retaliated in kind, raising its own levies on US products to 125% to counter the impact of Trump’s tariffs. Beijing has firmly stated it will take all necessary measures to “safeguard its rights and interests.”
While a potentially less disruptive trade war might soften the blow to the Oil demand outlook compared to previous fears, uncertainty persists because China is the world’s biggest energy importer. If the Chinese economy slows down due to the ongoing back-and-forth tariff conflict with the US, oil demand could still be affected and remain weak.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
