WTI retreats from $70 as Trump threatens additional 10% tariff on China
- The Oil price falls back from $70.00 as fresh Trump’s tariff threats have raised concerns over China’s economic growth.
- Trump announced additional 10% tariffs on China for pouring fentanyl into the US economy.
- Investors await US Trump’s meet with Ukrainian Zelenskyy on minerals deal.
West Texas Intermediate (WTI), futures on NYMEX, falls back to near $69.20 in European trading hours on Friday. The Oil price rebounded to near $70.00 on Thursday after recovering from a fresh two-month low around $68.30, which it posted on Wednesday.
The Oil price faces sharp selling pressure as fresh tariff threats from United States (US) President Donald Trump have escalated global growth concerns. On Thursday, Trump communicated in his tweet on Truth.Social that he is poised to impose additional 10% tariffs on China. Trump clarified that drugs pouring into the US economy through the borders of Canada and Mexico are majorly in the form of fentanyl, which is made in and supplied by China.
The imposition of additional import duties on China by the US is expected to make Chinese products less competitive in the global market. Such a scenario indicates a weak Oil demand outlook, given that China is the largest importer of Oil in the world.
President Donald Trump has also confirmed that Canada and Mexico will face 25% tariffs on March 4.
Meanwhile, growing optimism over peace in the war between Russia and Ukraine has already kept the Oil price on the back foot. Investors await Donald Trump’s meeting with Ukrainian leader Volodymyr Zelenskyy over the minerals deal on Friday. They are also expected to discuss terms for peace in Ukraine. Positive developments over peace between Russia and Ukraine would be an unfavorable scenario for the Oil price, assuming that the Eurozone and the US will revoke sanctions on Russia, which will result in an increase in seaborne oil flows into the global market.
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.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
