As trade tensions between the United States and China show signs of easing, the crude oil market is responding positively. West Texas Intermediate (WTI), the benchmark for U.S. crude oil, climbed to around $63.25 during early Wednesday trading in the Asian session. The temporary reduction in tariffs by the world’s two largest economies appears to be easing recession fears and boosting demand prospects for oil.
Tariff Cuts Drive Short-Term Oil Price Rally
Over the past weekend, U.S. and Chinese officials met in Switzerland and agreed to significantly scale back their reciprocal tariffs. Under the new arrangement, the U.S. will reduce its tariffs on Chinese imports from 145% to 30%, while China will lower its tariffs on American goods from 125% to 10%. These tariff reductions will remain in effect for 90 days. By lowering trade costs between the two largest oil consumers, this agreement is expected to provide a short-term boost to WTI prices.
Rising Oil Inventories and OPEC+ Output Could Cap Gains
Despite the bullish sentiment from trade news, some headwinds remain. According to the American Petroleum Institute (API), U.S. crude oil inventories rose by 4.287 million barrels in the week ending May 9—significantly above the expected drawdown of 2.4 million barrels. This unexpected build in stockpiles could limit further upward momentum in oil prices.
In addition, the Organization of the Petroleum Exporting Countries and its allies (OPEC+) are set to increase oil exports in May and June. OPEC’s production is expected to rise by approximately 411,000 barrels per day in May alone. This increase in supply may act as a ceiling for WTI prices in the near term, balancing out the bullish impact of easing trade tensions.
Submit Your Comments
(Replying)
Please keep in mind to avoid offensive keywords and also fake information.
Be the first one to comment.