Comments from Iran’s Oil Minister Bijan Zanganeh yesterday pushed oil prices higher as he suggested that OPEC might agree to deeper production cuts, but the rally did not last, with prices sagging early morning as bearish sentiment hit back.
But by late morning, prices were once again ticking upward on hopes that the US-China trade deal is progressing and with traders largely expect that the API will report later this afternoon a draw in refined oil products.
Both Brent and WTI were up at the time of writing.
The way prices have been moving during the last few days, chances are we will continue to see a continuation of their erratic behavior, although within a moderate range as expectations of a trade deal clash with oversupply worries and OPEC’s 2019 edition of the World Oil Outlook, which served to worry traders in the early morning hours which brought more bad news for oil bulls and push prices lower: according to the cartel, oil demand growth is slowing down and this trend will continue both over the medium and long term.
Oil production data from Russia showed the country continued to exceed its production cap in October, pumping 11.23 million barrels of crude daily, further weighing on prices. Related: IEA: An Oil Glut Is Looming
But prices wouldn’t stay down, buoyed by positive—but nonspecific—developments in the trade war between China and the United States. Those developments include an agreement in principle to the first phase of an “accord to end the dispute that has penalized hundreds of billions of dollars of trade between the two countries", according to the Wall Street Journal.
By 10:00am Central Time, WTI was trading up $0.80 (+1.47%) at $57.34. The Brent benchmark was trading up even more, by $0.93 (+1.50%) at $63.06.
By Irina Slav for Oilprice.com
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As everyone by now knows, the trade war has created uncertainty in the global economy and depressed the global demand for oil and prices. It also has widened an already existing glut from a relatively manageable 1.0-1.5 million barrels a day (mbd) before the war to an estimated 4.0-5.0 mbd. This glut has been big enough to nullify the impact of geopolitics on oil prices and also absorb a loss of 5.7 mbd from Saudi oil production.
Only an end to the trade war will brighten the prospects of the global economy and stimulate global oil demand and prices.
A sticking point, however, is China’s demand that the United States should roll back
some of the tariffs it has slapped on Chinese imports. However, China could afford to outwait the United States on tariffs having already won the war.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London