WTI slumps below $57.25 as escalating US-China trade tensions spark demand fears
- WTI price tumbles to near $57.25 in Wednesday’s early Asian session.
- Fears of a potential US recession and an escalating trade war between the US and China weigh on the WTI price.
- Crude oil stockpiles in the US fell by 1.057 million barrels last week, noted API.
West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $57.25 during the early Asian session on Wednesday. The WTI price extends the decline near a four-year low due to US President Donald Trump’s trade war rhetoric, growing recession fears in the US and weak global demand.
The Trump administration will impose a 104% tariff on China beginning at 04.01 GMT on Wednesday, adding 50% more to tariffs after Beijing failed to lift its retaliatory tariffs on US goods by a noon deadline on Tuesday set by Trump. Beijing vowed not to bow to what it called US blackmail after Trump threatened the additional 50% tariff on Chinese goods if the country did not lift its 34% retaliatory tariff.
China's Commerce Ministry said the country would fight to the end, raising concerns about a global economic downturn. This, in turn, exerts some selling pressure on the WTI price.
A surprise output increase by the Organisation of Petroleum Exporting Countries and allies (OPEC+) contributes to the WTI’s downside. OPEC+ announced plans to increase output, aiming to return 411,000 barrels per day (bpd) to the market in May, up from the previously planned 135,000 bpd.
The decline in crude oil inventories might provide some support to the crude oil prices. The American Petroleum Institute (API) weekly report showed crude oil stockpiles in the US for the week ending April 4 fell by 1.057 million barrels, compared to an increase of 6.037 million barrels in the previous week. So far this year, crude oil inventories have climbed nearly 22 million barrels.
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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