DTN Oil Update
Oil Futures Dropped Due to Recession Fears
HOUSTON (DTN) -- Oil futures settled lower to start the week on Monday, with the front-month NYMEX WTI hitting the $65 mark as traders continued to assess the impact of the tariff war on the U.S. economy, amid weak demand and abundant supply fundamentals.
The bearish sentiment in the oil futures market was also driven by concerns about a possible contraction of the U.S. economy in the following months as some tariffs imposed by the United States and its trade partners -- China, Canada and Mexico -- under the Trump administration will take effect this week.
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President Trump declared a one-month pause last week on additional trade tariffs levied on some imported goods from Canada and Mexico, which were schedule to go into effect on March 4. However, a 25% tax on imports on aluminum and steel from Canada and Mexico is expected to go into effect this week.
Retaliatory tariffs from China ranging from 10% to 15% on multiple U.S. agricultural goods are also anticipated to take effect this week, in response to the 20% tax on imported Chinese goods implemented by the United States to date.
Analysts have started to discuss the possibility of a recession in the U.S. in the coming months as a result of the tariff war initiated by the Trump administration.
On March 6, the Atlanta Federal Reserve forecasted that the U.S. GDP is expected to be at -2.4% in the first quarter of the year, down from a 2.3% expansion reported in February.
This week, market participant will focus on U.S. inflation data for February to be released by the U.S. Bureau of Labor Statistics on Wednesday, March 12. The market expectation for year-over-year inflation is 3%. In January, U.S. consumer prices rose 0.5%, bringing the annualized inflation rate to 3.0%. The increase was driven by higher energy and food costs, with gasoline prices climbing 1.2% in the month.
The NYMEX WTI futures contracts for April delivery fell by $1.07 to $65.97, front-month ICE Brent futures contract dropped by $1.16 to $69.20. RBOB futures contract for April delivery rose by $0.0191 to $2.0896 gallon while the April ULSD futures contract fell by $0.0373 to $2.1787 gallon.
The U.S. Dollar Index recovered for multi-day losses by climbing 0.18% to 103.99 against a basket of foreign currencies.
