Oil prices are already beginning to bounce back. West Texas Intermediate (WTI) futures are aimed at trading above $60, supported by bullish sentiment ahead of a tripwire U.S.-China meeting. U.S. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer will sit down with their Chinese counterparts in Switzerland. These conversations are sure to be equally thought-provoking and transformative. The main aim of these negotiations is likely to be de-escalation, not a detailed trade deal.
Better relations between the two economic powerhouses have provided some hope for future oil prices. This is particularly so given that China is now the world’s largest oil importer. Though tensions are high, analysts are hopeful. They are looking for WTI to extend its two-day bounce and break through 200-day and 50-day moving averages and descending trendline resistance during Wednesday’s European trading session.
Impact of Trade Relations on Oil Prices
The current trade war between the U.S. and China has resulted in significant tariff hikes. The U.S. has raised customs duties on Chinese goods for a total of an extra 54%, which consists of a 20% import tariff specifically aimed at countering drug imports. With Beijing’s retaliatory moves that number increases by an astounding 145%. By contrast, China has implemented tariffs of 125% on U.S. goods. These escalating tariffs have severely complicated trade flows and added great volatility and uncertainty to an already volatile oil market.
Cushing’s nickname, “The Pipeline Crossroads of the World” In fact, as Cushing is known, it’s a key hub for distributing WTI. The move towards cool heads prevailing in US-China trade negotiations can only be good news for demand – providing more bullish price recovery support from this side. Analysts point out that when concerns over the trade war are alleviated, oil prices benefit. This has been particularly true for WTI futures on the New York Mercantile Exchange (NYMEX).
Weekly oil inventory reports from both the American Petroleum Institute (API) and the EIA have a large impact on WTI oil prices. In addition to leading trade negotiations, these reports offer incredibly important, in-depth looks at the market. These reports give market participants information regarding supply levels and can play a large role in shaping trader expectations and market direction.
“My sense is that this will be about de-escalation, not about the big trade deal.” – CNBC
Weekly Inventory Reports Influence Market
Traders traditionally hold their breath as the time approaches for release of these reports. Second, they are closely watching how the market will react to any announcements of new inventories. A fall in inventories would be an indicator that demand is rising and could provide WTI support in the form of higher prices. On the other hand, a build in inventories might indicate an oversupply and weigh on oil prices.
Oil analysts note that WTI, Brent and Dubai Crude tend to move together with pricing trends. In fact, they tend to dither within 1% of each other 75% of the time. This positive correlation reflects the reality that what influences one kind of crude oil tends to influence the others.
Compounding the problem are OPEC+’s decisions to cut production. The oil producing cartel responded by vowing to increase global production by 960,000 barrels per day starting in June. This move is a response to Kazakhstan’s continued noncompliance with production limits. The Central Asian nation had made the case that OPEC+ quotas were damaging its oil fields through lack of utilization potential.
OPEC+ Production Hikes and Kazakhstan’s Role
Kazakhstan puts its national interests first before collective goals. This judgment underscores the wider tech wars within OPEC+, which threatens to disrupt internationally global oil supply chains and price flows. As countries navigate their commitments to OPEC+ while addressing domestic concerns, market participants remain vigilant about how these developments could influence WTI prices.
Kazakhstan’s prioritization of national interests over group objectives reflects broader tensions within OPEC+, which can affect global oil supply dynamics and pricing structures. As countries navigate their commitments to OPEC+ while addressing domestic concerns, market participants remain vigilant about how these developments could influence WTI prices.