Oil Prices Dip as U.S. Tariffs Cloud Demand Outlook
Lower Oil Prices, as the Outlook on Demand is Darkened by U.S. Tariffs
The price of oil tumbled within the last 24 hours with the news of expanded tariffing by the U.S threatening to slow down the pace of the global economy and lower energy consumptions. Market watchers are remaining alert as the geopolitical tensions and the changing economic policies are putting a strain on post-pandemic market mood.
What Happened?
New tariffs of 50 percent on some of the U.S. important imports, including semiconductors, pharmaceuticals and copper, were introduced by U.S. President Donald Trump- raising concerns over a second wave of global trade disturbances. This is in line with constant tensions with China, EU, and other partners in trade. The confusion sent global benchmarks of crude into a small decline:
Brent fell to 69.97 U.S Dollars/per barrel
The West Texas Intermediate (WTI) had decreased to 68.11 dollars per barrel
Why it is Important
The world demand of energy is closely interconnected with world trade and industrial activity. The new tariffs can:
Cut production of important industries
Negate supply chains around the world
Increase oil-intensive industries prices
All these may have a negative impact on oil consumptions combined with retaliation by other nations dampening the effects even more.
Market Response
To traders it responded with a reaction of caution:
Futures on crude had a light sell-off
Stocks that were based on oil decreased marginally
The markets on commodities were traded on the expectation of softer demand
Nonetheless, the demand of gasoline in the U.S. is persistently solid and the latest facts of the Energy Information Administration (EIA) indicated that crude stocks had dropped, which provided some buoyancy to the prices
Expert Opinion
There is potential that these tariffs may change the international balance in trade and energy requirement. Although the U.S. economy is robust, any reverse in the manufacturing may create a ripple.”
According to Natalie Huang, an energy strategist at GEX Capital, the fact behind it is that the western province is likely to experience a large increase in the number of its citizens who have joined ISIS in Syria.
International Implications
China and the EU will be considering counter measures
The recent economies that depend on the exports of energies might be under pressure
The OPEC+ might have to review the output strategies in case demand eased
What Is Next?
The market is volatile and geopolitical risks are rising and thus, traders of oil are supposed to be cautious. Oil prices would fall further in the next few weeks with any other trade-related actions or any indication of weakening global growth.
At the moment it is still about:
Washington Tariff developments
Revenge measures taken by trade partners around the globe
Demand and inventory of big economies on a weekly basis
Bottom line:
The oil market is under a bearish pressure as there is a fear that a new trade war may constrain the world energy consumption. On the one hand, the demand side of the formula is now questionable whereas on the other hand, there is the supply at bay
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