Adedapo Adesanya
By Adedapo Adesanya
Oil prices on Monday gained following positive comments from the world’s two largest economies. The latest development on the US-China trade talk brought about hopes for the global market.
Following this, Brent crude traded up by 29 cents or 0.46 percent to settle at $62.66 per barrel, while the US West Texas Intermediate (WTI) crude settled at $58.04 per barrel after gaining 27 cents or 0.47 percent.
The premise that the United States and China could soon complete the phase one deal to end the 16 months tariff war is a good arrangement for oil prices.
Monday’s higher opening prices came after US national security adviser Robert O’Brien said on Saturday that an initial trade agreement with China is still possible by December.
This came a day after US President Donald Trump and Chinese President Xi Jinping expressed a desire to sign an initial trade deal that has seen oil prices shaken through lowered global growth.
President Trump noted that he had yet to decide whether or not he wanted to a deal with China while his counterpart, President Xi, said he would not be afraid to retaliate when necessary.
On Monday, China’s foreign ministry disclosed that it hopes the United States will work with it on a basis of equality and mutual respect on the ongoing bilateral trade negotiations.
According to market analysts, a move by China to protect intellectual property will most likely provide support for the trade talks.
A major issue that could see both countries at loggerheads will be Hong-Kong as the US has made it known that it would not turn a blind eye to the anti-government protest which are founded on abuse of freedom and rights.
The Organisation of Petroleum Exporting Countries (OPEC) expectation to extend oil output cuts till June 2020 also looks good for oil demand and prices.
However, this output policy of OPEC is subjected to the December meeting scheduled for Vienna on 5 and 6, with the Joint Technical Committee expected to meet on December 4 before the meeting kicks off the next day.
Business Post‘s analysis shows that prices could be pushed higher if the OPEC alliance agrees to extend its supply cut by three more months to mid-2020.
This would also ensure a reduction in oil supply from the cartel and its members and allies which will reduce the risk of an oversupply in 2020.
Fatal unrest in middle Eastern countries of Iran and Iraq that has seen protesters shot and killed at have also pushed oil prices north.
