• 3 minutes UAE says four vessels subjected to 'sabotage' near Fujairah port
  • 6 minutes Why is Strait of Hormuz the World's Most Important Oil Artery
  • 8 minutes OPEC is no longer an Apex Predator
  • 12 minutes Mueller Report Brings Into Focus Obama's Attempted Coup Against Trump
  • 2 hours Canada's Uncivil Oil War : 78% of Voters Cite *Energy* as the Top Issue
  • 2 hours Australia Sky News Election Summary: "This was the Climate Change Cult Election, and the Climate Change Cult Lost"
  • 6 hours China Downplays Chances For Trade Talks While U.S. Plays ‘Little Tricks’
  • 6 hours California Threatens Ban on ICE Cars
  • 26 mins Australian Voters Reject 'Climate Change' Politicians
  • 6 hours IMO2020 To scrub or not to scrub
  • 10 hours Global Warming Making The Rich Richer
  • 6 hours Did Saudi Arabia pull a "Jussie Smollett" and fake an attack on themselves to justify indiscriminate bombing on Yemen city population ?
  • 7 days How can Trump 'own' a trade war?
  • 7 days China, U.S. Hold 'Productive' Trade Talks In Beijing
  • 2 hours Some Good News on Climate Change Maybe
  • 6 hours Wonders of Shale- Gas,bringing investments and jobs to the US
  • 7 hours "We cannot be relying on fossil fuels to burn as an energy source at all in our country" - Canadian NDP Political Leader
Alt Text

STEO: Brent To Average $70 This Year

The Energy Information Administration expects…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

Trending Discussions

Oil Prices Could Soar On Trade War Truce

President Trump extended the trade talks with China, citing “substantial progress,” which will defuse one of the largest downside risks to the oil market, at least for a while longer.

With the March 1 deadline approaching, the U.S. and China have reportedly started to sketch out the broad outlines of a deal, although the tough work lies ahead. Securing some rather minor concessions from China to purchase more soybeans from the U.S. was the easy part, but forcing sweeping changes to its trade practices – the so-called “structural reforms – will be extremely difficult, if not potentially unobtainable.

But the American president can ill-afford an economic downturn, which would be much more likely if he continues with his trade war. He surely recognizes this, despite his aggressive position towards China last year. Trump proudly claimed that was a “tariff man” last year, but the prospect of hiking tariffs from 10 to 25 percent on $200 billion worth of Chinese goods appears to be too much even for him to stomach.

In fact, Trump has become much more dovish on the trade war than his lead negotiator, which, according to Bloomberg, has created cracks in their relationship. People come and go in the Trump orbit, and U.S. Trade Representative Robert Lighthizer is now in the hot seat. Lighthizer has long been a hardliner when it comes to confronting China’s trade practices. Trump was too, which is why they got along and likely why Trump wanted Lighthizer as his point man on trade. Related: The $32 Trillion Push To Disrupt The Entire Oil Industry

But the cracks in the global economy, the stock market turmoil in the fourth quarter, Trump’s flagging approval rating, and the pressure from the onset of the 2020 presidential campaign seem to have all combined to change Trump’s thinking. In mid-2018, he showed no hesitation about rattling the global economy with a radical shift towards protectionism. However, his initial three-month delay on higher tariffs in December, and especially his latest decision to extend the talks, demonstrate his desire for a face-saving way to step back from the abyss.

More to the point, Lighthizer apparently embarrassed Trump in public last week, differing with him on the specifics of the trade deal. Contradicting the mercurial boss in public is the best way to lose your job, although Lighthizer will likely stick around for a while longer in an effort to stitch together a deal.

The problem is, as Bloomberg lays out, that Trump’s eagerness to cut a deal, declare victory and put the issue behind him makes it much less likely that China will give ground on the major issues that bother the U.S. government. If Trump is desperate for a deal to take a domestic political liability off of his plate, why should China give ground?

“Trump has now substantially ratcheted up the pressure on his negotiators to strike a deal with China, even if it does little to assuage U.S. hard-liners’ concerns about China’s commitments on core structural issues,” Cornell University Professor Eswar Prasad told the Wall Street Journal. “There is still a yawning gap between the two sides on major issues due to U.S. lack of trust in China’s commitments on structural issues and China’s unwillingness to make any fundamental changes to its industrial and economic strategies.”

For its part, China’s state-backed Xinhua said on Sunday that “China and the United States are inching ever closer to reaching a mutually beneficial and win-win agreement with substantial progress” made on a long list of issues. The Shanghai Composite surged 5.6 percent on Monday. Related: Against The Odds, Big Oil Doubles Down On Megaprojects

Should Trump feel compelled to cut a deal, even if it means having to forgo some of the major sticking points on the list of U.S. priorities, that could pave the way for more oil and gas exports to China. Even in the interim, China could purchase more shipments as a show of good faith. “We expect more US crude to come to China as a result of Beijing's promise to increase US energy imports,” a Beijing-based trader told S&P Global Platts.

More broadly, stepping back from the brink could also take away one of the largest downside risks to the oil market in 2019. The ratcheting up of tariffs threatened to drag down global growth, but a major trade “deal,” however illusory, would remove that danger.

The flip side, from Trump’s perspective, is that a trade truce could push up oil prices.

It’s going to be pretty difficult for Trump to achieve so many conflicting policy goals at once.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News