Awaiting the Results of Trade Talks – Oil Prices Go Lesser
On Tuesday oil prices remain just below 2019 highs as everyone waited for news about the U.S. – China trade talk outcome this week. The market was relatively light with supply cuts being led by OPEC. International Brent crude oil futures were five cents above their last close at $66.52 per barrel at 0755 GMT. It was not too far off from the 2019 high of $66.83 a barrel hit reported in the previous session.
U.S. West Texas Intermediate (WTI) crude futures went up by 44 cents to $56.03 per barrel. Their last 2019 high was reported at $56.33 the previous day. Traders remain cautious on taking up new positions right before the outcome of the U.S – China trade talks that start on Tuesday in Washington between senior U.S. and Chinese negotiators.
Merill Lynch, Bank of America said in a note that the U.S – China trade war was affecting the economic growth globally negatively. According to Lynch, it is essential to address the global trade tensions in order to improve the economic outlook. The Bank of America expects Brent prices to average between fifty and seventy dollars per barrel based on the economic outlook as well as supply and demand balances.
The supply cuts led by the Middle East led OPEC (Organization of the Petroleum Exporting Countries) have caused the global oil markets to remain tight, especially with Saudi Arabia, the top exporter cutting the most. The first half of February saw Saudi seaborne crude exports to fall to 6.204 million barrels per day, resulting in a 1.341 million barrel per day decline compared to the previous month and 0.91 barrel per day decline compared to last year as per the data intelligence firm Kpler.
U.S. sanctions against petroleum exporters Venezuela and Iran have cause oil markets to dip further. Iran is a major crude supplier to major demand centers like China and India in Asia, whereas Venezuela is a key exporter of crude oil to U.S. refineries. According to Harry Tchilinguirian, BNP Paribas, the market is regaining its bullish footing, but it remains subject to the outcome of the U.S. trade talks. On Tuesday, HSBC Holdings warned that the economic slowdown in Britain and China could cause further obstacles this year.
More talks between China and the United States to resolve the trade issues will take place in Washington on Tuesday between senior negotiators. Last week, OPEC lowered its growth forecast in world oil demand for this year to 1.24 million bpd.