Crude oil markets came under pressure this week as Saudi Arabia reported a full production rebound in October and traders grew impatient over progress on a US/China trade deal. Like everyone else, we’re still waiting for a deal to clear the macro skies and set the stage for a risk-on rally. However, recent DOE data has us nervous Trump/Xi cooperation won’t be enough to clear the overhang of crude oil stocks.
In the Middle East, Saudi Arabia confirmed October crude production at 10.3m bpd. The mark represented a 1.2m bpd improvement from September when Iran-lead drone strikes knocked millions of barrels of production offline. At the time of the strikes, Saudi officials were steadfast in claiming their output would return to form within weeks. The October data seems to confirm the Kingdom was extremely effective in getting back to business as usual.
On the trade front, US and Chinese officials continue to signal that Phase 1 of their trade deal is nearly complete but have avoided setting a date to sign a preliminary agreement. Markets watched Trump’s speech at the NY Economic Club closely for timing hints this week but were ultimately disappointed when the President didn’t offer the firm timeline that markets are looking for. Nevertheless, US equity markets continued to reach new record-highs suggesting baseline expectations see a deal around the corner.
Back to the fundamental side, last week’s US petroleum inventory report was…