Yesterday morning, the sell-off in oil was still in full swing. So much so, that at midday front-month US Light Crude fell below $55 per barrel to trade at its lowest level since early February 2021.
Prices recovered a touch throughout the afternoon. But Trump’s unexpected announcement of a 90-day postponement in most of his global tariffs saw crude prices soar. US Light jumped by $5 per barrel (9%) in the space of 20 minutes, in a move which must have crushed many leveraged short-sellers.
Source: TradingView
Oil built on those gains into yesterday's close. But it has spent today’s session drifting lower. While reducing tariffs to most US trading partners, the Trump administration increased its tariffs on Chinese imports to 125% last night.
This was in retaliation to China’s move to hit US imports with levies of 84%. It seems clear now that this is a trade war between the US and China. Neither side will come out unscathed. But given the current precariousness of China’s economy, amid the damage done to Chinese consumers by the country’s property meltdown, then on balance, China is at greater risk of harm through a protracted trade war.
Ultimately, that is yet another headwind for energy prices, along with the larger-than-expected production increase announced by OPEC+ last week.
