Oil Falls After US, China Sign Trade Deal

By Adedapo Adesanya

Prices of oil declined on Wednesday as American President Donald Trump and Chinese Vice Premier Liu He signed an initial trade deal in Washington DC to stop the trade war between both nations that has affected the global markets and cut into economic growth.

Last night, the Brent crude was trading down by 21 cents or 0.33 percent at $64.25 per barrel, while the West Texas Intermediate crude shed 21 cents or 0.36 percent to settle at $58.02 per barrel.

This signing of the deal means China will double its purchases from American farmers worth $12.5 billion in the first year and then an additional $19.5 billion in the second year. In addition, the Chinese is expected to open its markets to foreign firms and provide strong new protections for trade secrets and intellectual property.

The 86-page agreement comes after 18 months of negotiations and tariff wars between the world’s two largest economies.

However, this news did not lift the market on Wednesday as investors confidence waned even after weekly government data revealed that US inventories dropped.

Data from the Energy Information Administration (EIA) also did not nothing to help the market despite showing that crude inventories fell by 2.5 million barrels till Friday, January 10.

It had earlier been projected by the S&P Global Platts survey that the stockpile would rise by 500,000 barrels, while the American Petroleum Institute (API) on Tuesday reported an increase of 1.1 million barrels.

Analysts believe that prices may extend losses if the trade deal does not satisfy market expectations and leaves investors with more questions than answers especially with the vague details of the deal.

Prices were also hit by a report from the Organization of the Petroleum Exporting Countries (OPEC) that the group expected lower demand for its oil in 2020 amid rise in global demand as rival producers grab market share.

The oil cartel increased its 2020 world oil demand growth forecast by 140,000 barrels to 1.22 million barrels a day, while also projecting a rise in its global economic growth forecast to 3.1 percent for the year ahead. It also noted that output in the United States was expected to rise in 2020.

“The continued accommodative monetary policies, coupled with an improvement in financial markets, could provide further support to ongoing increases in non-OPEC supply,” OPEC said in the report.

OPEC and some non-OPEC allies such as Russia have been curbing production by 1.7 million barrels after signing an agreement to prevent an oil glut and support oil prices above $60 per barrel in December with the deal set to expire in March.

Adedapo Adesanya is a journalist, polymath, and connoisseur of everything art. When he is not writing, he has his nose buried in one of the many books or articles he has bookmarked or simply listening to good music with a bottle of beer or wine. He supports the greatest club in the world, Manchester United F.C.

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