WTI moves below $61.50, downside seems limited due to easing of US-China trade tensions
- WTI price may recover amid renewed optimism driven by progress in US-China trade talks.
- The two nations have reached a preliminary agreement in Switzerland to substantially reduce tariffs, indicating a de-escalation in trade tensions.
- Oil prices may struggle due to concerns over a possible supply glut, especially with the prospect of increased OPEC+ output.
West Texas Intermediate (WTI) Oil price paused its three-day winning streak, trading around $61.40 per barrel during Asian hours on Tuesday. Despite this pullback, Oil prices remain underpinned by optimism following progress in the United States (US)-China trade negotiations.
Over the weekend, the United States and China reached a preliminary deal in Switzerland to significantly reduce tariffs, signaling a possible easing of trade tensions. Under the agreement, the US will lower tariffs on Chinese goods from 145% to 30%, while China will cut its tariffs on US imports from 125% to 10%. The breakthrough has been widely welcomed by markets as a key step toward de-escalation.
However, downside risks to Oil prices persist. Concerns about oversupply continue to weigh on the Oil market, particularly with OPEC+ signaling a potential increase in output for May and June. Adding to the pressure, President Donald Trump indicated progress in nuclear talks with Iran, fueling speculation that US sanctions on Iranian oil exports could be eased.
Geopolitical developments are also in focus. Ukrainian President Volodymyr Zelensky has invited President Trump to participate in potential peace talks in Turkey this week, as Kyiv intensifies efforts to secure a cease-fire in the ongoing conflict with Russia.
On the regulatory front, the US Department of Energy announced plans on Monday to eliminate or revise more than 40 regulations and programs as part of President Trump’s push to roll back federal oversight and diversity initiatives. The department claims the move could save taxpayers $11 billion and marks the first phase of its most extensive deregulation drive to date.
Looking ahead, market participants are awaiting the release of the US Consumer Price Index (CPI) report for April, scheduled later on Tuesday. Analysts expect headline inflation to rebound to 0.3% month-over-month from a previous -0.1%, while core CPI is also projected to rise to 0.3% from 0.1%. Year-over-year figures for both are forecast to remain unchanged.
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.