WTI plunges to near $60 on fears of global economic turmoil
- The Oil price has posted a fresh four-year low near $58.80 amid escalating concerns over the global economic outlook.
- US President trump has imposed a total of 54% tariffs on China.
- Trump has also announced a 10% baseline tariffs for all of his trading partners.
West Texas Intermediate (WTI) recovers some intraday losses in European trading hours on Monday after sliding extensively to near $58.80 earlier in the day, the lowest level seen in four years. The Oil price is still 3% down near $60.40, at the time of writing.
The black gold is facing significant selling pressure since the first day of April as financial market participants are worried about the global economic outlook after the imposition of reciprocal tariffs by United States (US) President Donald Trump on Wednesday. Trump swept almost half of tariffs on his trading partners of what they charge from the US in addition to a universal 10% baseline import duty.
The scenario is unfavorable for the Oil demand outlook as investors expect higher tariffs by the US and likely countermeasures by other nations will be inflationary and weigh on the global economic productivity.
The imposition of worse-than-expected levies by Trump on his Asian peers, such as China and India, appears to be a major blow to the Oil price. The US has imposed a total of 54% duty on China, totalling 34% reciprocal tariff, 20% levy for pouring fentanyl into the American economy. It is worth mentioning that China is the largest importer of Oil in the world.
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.
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