WTI crude oil futures rose past the $67 mark on Monday, inching higher from the near-two-year low of $66.4 reached on March 6th.
WTI inches higher for second session
The rebound came amid a weaker dollar and some bargain hunting by energy traders, who saw an opportunity after a series of bearish factors weighed on energy demand. The outlook for fuel consumption remained subdued, largely due to escalating trade tensions between major oil consumers and producers. The ongoing trade disputes between the US, China, and Canada, characterized by tariff impositions and retaliatory measures, have raised concerns about the global economic outlook and its potential impact on oil demand. The specter of continued trade wars exacerbated the already fragile sentiment in the energy market, as traders feared a slowdown in industrial activity and consumer spending.
How global tensions hit oil prices
The impact of these tensions was compounded by aggressive economic policies from the US government. President Trump and Treasury Secretary Janet Yellen both signaled the possibility of economic hardship, warning that the broader consequences of the tariffs could lead to slower growth and rising costs. This heightened the uncertainty surrounding the energy markets, especially given the reliance of oil demand on the economic performance of key global players. The combination of rising tariffs and potential slowdowns in major economies added downward pressure to the oil market, even as energy traders looked for buying opportunities.
Meanwhile, OPEC+ members’ decision to move forward with oil output hikes as early as April further complicated the outlook for oil prices. The move followed difficulties by several members in meeting their output cut pledges, and it highlighted the challenges the cartel faces in managing global supply while maintaining price stability. This decision to increase production despite the uncertain demand outlook signaled a shift in strategy as OPEC+ adjusts to changing market conditions.
Effects from China macro news
In addition to these factors, fresh data from China, the world’s top fuel importer, showed that both consumer and producer prices fell more than expected in February. This unexpected dip in prices raised concerns about sluggish domestic consumption, despite the country’s efforts to stimulate growth through increased credit and fiscal stimulus. The soft price data from China further underscored the fragile demand environment and deepened fears that the global economic recovery may be stalling. With oil prices facing pressure from a combination of weak demand signals, trade tensions, and supply-side changes, traders and investors will be watching closely for further developments that could impact the outlook for crude oil in the near term.
