West Texas Intermediate (WTI) crude oil is trading around $65.45, reflecting concerns over potential demand decline due to US tariffs on Canada, Mexico, and China impacting global economies.
An executive order by President Trump has increased duties on Chinese goods while exempting those from Canada and Mexico. This policy uncertainty and discussions of a possible US recession may negatively affect WTI prices in the near future.
Impact Of Potential Sanctions
In contrast, anticipated sanctions against Iran and Russia could bolster WTI prices, as the US aims to restrict Iranian oil exports.
WTI oil is known for its lower gravity and sulphur content, making it high-quality and easily refined. Supply and demand fluctuations, as well as political factors, significantly influence its pricing.
Weekly inventory reports from the American Petroleum Institute (API) and the Energy Information Agency (EIA) also play a role in price determination, as changes in inventories reflect supply and demand dynamics.
OPEC’s decisions on production quotas impact WTI prices, with reduced quotas likely pushing prices up due to tightened supply.
OPEC’s Role In Pricing
At present, crude oil is fluctuating around $65.45 per barrel, influenced by worries that tariffs imposed by the United States might dampen demand. The pressure stems from broader economic effects, particularly as higher levies on Chinese goods introduce fresh uncertainty into global trade. Meanwhile, Canada and Mexico have received exemptions, which may offer some relief to North American markets.
Trump’s directives suggest a more confrontational approach toward Beijing, with increased tariffs raising concerns about a slowdown in economic activity. If industries reliant on these imported goods cut production or reduce transportation needs, energy consumption could dip. Discussions regarding a possible downturn in the American economy are also feeding into expectations that demand might weaken, which could weigh on crude prices moving forward.
That said, looming sanctions aimed at Iran and Russia may counter some of this downward pressure. The White House’s objective to curb Tehran’s oil exports, alongside measures targeting Moscow, could constrain global supply. This introduces another variable, as any disruption in availability might provide support to prices. Markets will remain sensitive to any updates on these sanctions, particularly if enforcement tightens in the coming weeks.
The specific qualities of West Texas Intermediate, such as its lighter composition and lower sulphur content, make it desirable for refining. Because of this, any imbalance in supply and demand has a direct effect on its valuation. Traders must remain attentive to weekly figures from both the API and EIA, as these inventory statistics offer real-time insights into shifts in supply levels. Furthermore, adjustments in stockpiles can serve as a barometer for overall consumption trends.
Developments within OPEC will also require careful monitoring. If the group opts to restrict output further, constrained supply could underpin price gains. Conversely, signals suggesting stabilisation or increased production may soften prices. Whether additional limits are put in place will hinge on internal negotiations and external factors such as geopolitical risks and economic projections.
