WTI crude oil futures experienced a significant decline of 4.2%, closing at $58.2 per barrel on Friday, marking their lowest point since May 7. This drop came on the heels of renewed trade tensions between the US and China, igniting market volatility. President Trump threatened substantial tariff hikes on Chinese imports and suggested the possibility of canceling his forthcoming meeting with President Xi Jinping. These developments heightened fears of a prolonged trade war, which could impede global economic growth and diminish oil demand.
This price decrease was further exacerbated by persistent bearish market sentiment, fueled by an increase in global supply. This includes higher production levels not only from OPEC+ but also from nations outside the OPEC consortium. Additionally, the easing of geopolitical tensions in the Middle East, with strides toward a ceasefire in Gaza, eliminated a crucial risk factor that previously bolstered oil prices.
Market dynamics saw traders intensify their selling activity, resulting in a spike in short positions on WTI crude, while risk-averse investors retreated from equity markets, thereby intensifying the downward pressure. Analysts have observed that without a favorable catalyst to encourage buying, crude oil prices may continue to exhibit volatility around the $60 mark, owing to concentrated options hedging at that level.
