WTI trades with caution below $66.00 on persisting global trade uncertainty
- The Oil price seems vulnerable near the weekly low around 65.00 amid global trade jitters.
- Signs of escalating US-EU trade tensions could weigh on the Oil price.
- Traders pare Fed dovish bets as the impact of Trump’s tariffs has started feeding into inflation.
West Texas Intermediate (WTI), futures on NYMEX, trades cautiously around $65.70 during the late Asian trading session on Wednesday. The Oil price oscillates close to near the weekly low as investors remain uncertain over the energy demand amid persistent global trade tensions.
The announcement of reciprocal tariffs by the United States (US) on its leading trading partners such as the European Union (EU), Japan, Canada, Mexico and South Korea along with 17 more nations has prompted uncertainty over global trade harmony.
US President Donald Trump has imposed tariffs on 22 nations for failing to reach a trade agreement during the 90-day reciprocal levy pause. Meanwhile, the EU has also prepared proportionate countermeasures if it fails to strike a deal with the US before the new August 1 deadline. The imposition of countermeasures by the EU on imports from the US could propel trade tensions as Trump has already warned that he will raise additional duties in case of retaliation by any economy.
Meanwhile, accelerating inflationary pressures in the US as importers start passing the impact of tariffs on consumers have raised doubts whether the Federal Reserve (Fed) will reduce interest rates in the September policy meeting, a scenario that is unfavorable for the Oil price.
On Tuesday, the Consumer Price Index (CPI) report for June showed that prices of a number of products imported by the US grew sharply, led to a sharp increase in the headline inflation to 2.7% on year, as expected.
Market experts have warned that current price pressures reflect seldom effect of sectoral tariffs and the impact of additional levies announced by President Trump on nations is yet to be filtered through. This would allow Fed officials to demand more time for assessing the impact of tariffs on inflation.
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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