WTI extends winning streak on US-China trade truce

West Texas Intermediate futures on NYMEX extend their winning streak for the fourth trading session on Tuesday. The crude oil price climbed to near $62.00 as the 90-day agreement between the US and China to reduce tariffs substantially by 115% has boosted WTI’s demand outlook.

On Monday, the US and China agreed to lower import duties to 10% and 30%, respectively, aiming to avert the trade war that led market experts to downgrade the global economic outlook.

Signs of improving US-China trade relations have strengthened the crude oil price, given that Beijing is the largest importer of energy in the world.

Meanwhile, the temporary truce between the US and China has diminished market expectations of interest rate cuts by the Federal Reserve in the July meeting. Such a scenario could limit the upside in the crude oil price.

On Monday, Fed officials cheered the US-China deal and stated that the impact of tariffs will be lower than what they had anticipated earlier, but didn’t rule out fears of an increase in inflation.

According to the CME FedWatch tool, the probability for the Fed to cut interest rates in the July meeting has dropped to 38.6%, from 78% recorded a week ago.

The next trigger for the crude oil price will be a meeting between Russian leader Vladimir Putin and Ukrainian President Volodymyr Zelenskyy, if Putin agrees to it.

Zelenskyy has insisted on meeting with Putin in Turkey on Thursday to discuss the war in Ukraine. Positive outcomes from the war talks would be favourable for crude oil.

(Source: OANDA)