Oil prices have broken new multi-month highs, but the next level up may largely depend on what happens between the U.S. and Chinese trade negotiations.
There have been conflicting reports in recent days. Oil prices fell back on news that China was resisting U.S. demands and digging in its heels, which the market interpreted as a bad sign for the outcome of a trade deal.
The two sides have gotten this far by hashing out the easy stuff. China agreed to buy more American energy and farm products, and the U.S. delayed tariffs and signaled a desire to end them. But the hard issues were always going to be difficult to overcome. These include intellectual property rights, access to the Chinese market for American firms, data-services, and other practices by the Chinese government that Washington views as unfair. On top of those specific issues, the two sides are arguing over how to enforce the deal, and how quickly to roll off the tariffs.
Trump has sounded an optimistic tone for weeks, which has raised expectations of a forthcoming deal. The U.S. has twice delayed the implementation of tariffs, citing progress in the negotiations. But Bloomberg reported that China has been pushing back because it feels that while it is making concessions, the U.S. side has been more non-committal.
Trump had floated a meeting with Xi at Mar-a-Lago at the end of March. That was pushed off until April and recently was pushed off again until June. Markets sank on the news and…