The deal will cut U.S duties on Chinese goods to 30% from the current 145%. Beijing said it would cut its blanket tariffs on American products from 125% to 10%. The reductions on both sides will go into effect on Wednesday.
Crude Oil: The Trade of The Year?
According to GSC Commodity Intelligence – “this agreement opens the door to the most asymmetric trade setup in years”. In a note to clients, analysts stated: “We’re looking at an asset that’s been mispriced for months. Recession fears dragged Oil down, but now the macro has flipped – and the market hasn’t caught up yet. We could see a $10-$15 per barrel repricing over the coming weeks”.
A Perfect Storm of Bullish Catalysts
Crude imports into China – already the world’s largest oil importer – climbed to 12.6 million barrels per day in April, up 7.4% from a year earlier. GSC Commodity Intelligence expects that figure to accelerate sharply as state-owned refiner’s ramp up procurement to capitalise on fire-sale prices and strengthen energy security under new trade agreement.
Beyond the new U.S-China tariff deal – a convergence of supply-side risks are also fuelling bullish sentiment. With tensions in the Strait of Hormuz and ongoing disruptions in Libya and Nigeria, the margin for supply shocks remains thin. This creates a fragile balance where even a modest demand shock could ignite a major price breakout.
And let’s not forget – with inventories already drawing and summer driving season approaching fast, it won’t take much for Oil to test new multi-month and multi-year highs ahead.
As GSC’s Head of Trading, Phil Carr, put it: “Whichever way you look at it, one thing is clear. Oil is a high-conviction, high-upside trade with bullish tailwinds from every direction.”
