DTN Oil Update
Oil Futures Increase Despite Tariffs and Recession Fears Persist
HOUSTON (DTN) -- Oil futures bounced back Tuesday morning after hitting multi-year lows for the last three consecutive trading sessions, amid trade tensions due to global tariffs and expectations of a potential recession in the U.S. and a global growth slowdown.
Traders remain focused on the impact of a 10% global tariff levied by the United States on all countries, which became effective on Saturday, April 5.
"China will take necessary measures to resolutely safeguard its lawful rights and interests. If the United States ignores the interests of the two countries and the international community and insists on fighting tariff wars and trade wars, China will surely fight till the end," said a Chinese foreign ministry spokesperson, according to China's news agency Xinhua Tuesday.
China's Customs Tariff Commission announced Friday it will impose a retaliatory 34% tariff on all U.S. imports starting April 10, followed by threats from U.S. President Donald Trump to levy an additional 50% tariff on China and terminate negotiations if the Chinese government fails to withdraw its retaliatory tariffs on the U.S.
Separately, European Union trade ministers met on Monday, April 7, to discuss the response to the implementation of U.S. tariffs on steel and aluminum from the region and their willingness to negotiate a zero-to-zero trade tariff agreement with the United States, according to media reports.
China and EU's reaction came after a 10% baseline tariff on all countries levied by the U.S. took effect on Monday, April 7,, with additional specific tariffs targeting Chinese and EU imported goods.
The Trump administration levied a 34% tariff on imported goods from China, which previously were levied with a 20% tariff, while imports from the EU are expected to face a trade tariff of 20%, and Japan will see 24% tariffs. These tariffs are set to take effect on April 9. Canada and Mexico were exempted from such tariffs, at least for now.
Growing concerns about the impact of the trade war on the global economy and oil demand have led some analysts to revise their forecasts for the U.S. GDP on expectations of a recession.
The front-month WTI crude contract for May delivery on the NYMEX rose by $0.75 to $61.45 bbl, while the June ICE Brent futures contract increased to $64.89 bbl, up by $0.68 from the previous trading session.
Downstream, the front-month RBOB futures contract climbed by $0.0233 to $2.0434 bbl and the ULSD futures contract for May delivery rose by $0.0253 to $2.0952 bbl.
In contrast, the U.S. Dollar Index weakened by 0.20% to 102.77 against a basket of foreign currencies.
The confirmation that OPEC+ countries were offering additional oil production of 2.2 million bpd starting last week is expected to continue putting pressure on the oil futures markets despite the rebound seen this morning.
Last Saturday, April 5, OPEC's Joint Ministerial Monitoring Committee (JMMC) met via videoconference to review crude oil production data for January and February from countries within the oil cartel and reaffirmed that it will continue to monitor adherence to the production adjustments agreed upon in past meetings.
