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Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

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U.S. And China Hold Key To Higher Oil Prices

Trump Xi

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.

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 WTI stopped short of $60 per barrel. While oil has been rising as the supply/demand fundamentals tighten, the U.S.-China trade war looms large.

“The feel-good factor was dealt a blow yesterday in the form of resurfacing trade jitters,” Stephen Brennock of PVM Oil Associates Ltd. wrote in a report. “Those putting their betting chips on an imminent price surge will also be eyeing a further downswing in U.S. petroleum stockpiles.”

Related: Oil Prices Shoot Up On Large Inventory Draw

But one could put an optimistic spin on the trade talks as well. Trump’s delay of tariffs is a sign that the U.S. does indeed feel that there is concrete progress in the negotiations.

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  • Mamdouh Salameh on March 21 2019 said:
    Being the two biggest economies in the world, China and the United States have a huge sway over the oil global market and oil prices. Therefore, an early end of the trade war between tem will provide a huge boost to the global economy and oil prices.

    And despite the delay, a deal will be reached because both sides want it. Both their economies have been adversely affected by the tariffs with the US economy suffering more simply because China’s economy is bigger and far more integrated in the global trade system than the United States’. The proof is that China’s economy is projected to grow this year by 6.6% as it did in 2018 compared with some 2.5%-3.0% for the US and 2% for the European Union (EU). Moreover, China’s crude oil imports hit their highest record in January and February reaching 10.4 million barrels a day (mbd) and are projected to reach 11 mbd this year. This is certainly not a sign of a slowing economy.

    Moreover, President Trump has an election around the corner and can, therefore, ill-afford to let the trade war devastate the farming states in America’s heartland where he draws a lot of support.

    Another factor is that China will never put its name to any agreement that allows President Trump to claim victory. It will just walk away from the negotiations.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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