WTI crude at its lowest since February 2021 in response to reciprocal tariffs
Oil continues its strong declines following yesterday’s session, where WTI crude fell below $60 per barrel. Currently, we are observing prices below $58 per barrel, although it was lower during the Asian session. At one point, oil lost almost 3%, but this decline has now been reduced to -0.5%.
Initially good sentiment from yesterday’s session was neutralized by Trump’s announcement of an additional 50% tariff on China. Consequently, the total tariff rate on Chinese products will amount to 104%. This will likely cause trade between China and the USA to decrease drastically in the coming months, which will obviously significantly lower demand for oil from the world’s second-largest consumer of this product. Increasing concerns are fueled by a strong rise in yields in the USA. There is speculation that this is China’s reaction in the form of a sell-off of US debt. Previously, it was repeatedly pointed out that recent US actions were aimed at lowering yields. At this point, 30-year bond yields are rising above 3%.
It is also worth remembering that OPEC+ is scheduled to increase production from the beginning of April, although, of course, at current prices, some reaction from the cartel can potentially be expected. It should also be emphasized that the $60 level is critical for many producers worldwide, including shale producers, as the marginal cost of shale oil extraction in the USA hovers around $60-65 per barrel. Goldman Sachs warns that a scenario of $40 per barrel this year cannot be ruled out.
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