WTI tanks almost 8% as Trump tariffs stoke global economic risks
- The Oil price continues to bleed as reciprocal tariffs announced by US President Trump have stoked fears of a global economic slowdown.
- A potential tariff war between the US and China would further deteriorate the Oil demand outlook.
- IMF Georgieva has urged the US and its trading partners to resolve trade issues.
West Texas Intermediate (WTI), futures on NYMEX, continues to face a bloodbath as the announcement of reciprocal tariffs by United States (US) President Donald Trump has prompted global economic risks. The Oil price on NYMEX is cumulatively down almost 12.75% on Thursday and till Friday’s early North American session.
Financial market participants expect the new suite of Trump’s tariffs would force business owners to postpone their fresh investment plans, across the globe, amid uncertainty over how the global market will shape after their imposition. Such a scenario bodes poorly for the Oil demand outlook, eventually weighing pressure on its price.
Additionally, fears of countermeasures by nations that are blaming US President Trump for jolting global markets after announcing harsh-than-expected levies would further weigh on the Oil price. During European trading hours, China threatened to impose additional tariffs of 34% on all US imports from April 10 in retaliation to Trump’s reciprocal tariffs announced on Wednesday. A potential trade war between the US and China would be unfavorable for the Oil price, given that China is the largest importer of Oil in the world.
Meanwhile, International Monetary Fund (IMF) Managing Director Kristalina Georgieva urged on Thursday that the US and its trading partners to work constructively to “resolve trade tensions and reduce uncertainty”. She warned that higher import duties announced by US President Trump clearly represent a “significant risk to the global outlook at a time of sluggish growth”.
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.