Remarks on US-China Trade Deal Status Disrupt Oil Prices
By Adedapo Adesanya
Prices of crude oil slipped from a three-month high on Tuesday, June 23 after it had rallied earlier in the day as a result of comments on the status of the US-China trade deal.
The Brent crude, which initially hit $43, shed 68 cents or 1.58 percent yesterday to trade at $42.40 per barrel. Also, the US West Texas Intermediate crude dropped 64 cents or 1.47 percent to settle at $40.13 per barrel.
Crude futures earlier rallied after American President, Mr Donald Trump, insisted that the deal between both countries was fully intact, contradicting remarks from a US trade adviser, which brought fears to the market.
The oil market was unsettled by the surprise comments from White House trade adviser, Mr Peter Navarro, who said the hard-won deal was over.
Oil prices have been buoyed in recent days by signs that demand was coming back, but renewed fears of a second wave of the coronavirus has threatened this.
However, with China being the largest importer of crude in the world, and with the trade deal with Washington widely considered a crucial factor for sustained oil demand growth in the Asian powerhouse, the good news may well outweigh the bad news going forward.
Also, supplies in the US, the largest producer, are expected to show a decline in the week ended June 19, with a forecast that the Energy Information Administration (EIA) on Wednesday will report a fall of 100,000 barrels in domestic crude supplies.
They also expect to see a decrease of 1.9 million barrels in gasoline stockpiles, while distillate inventories are likely to edge up by 100,000 barrels.
The weekly round of US inventory data begins with industry figures later on Wednesday morning with the American Petroleum Industry (API) followed by the EIA later.
Oil has rebounded since plunging below zero in April and is now trading around levels last seen in early March before a short-lived but damaging price war broke out between Russia and Saudi Arabia.
Some of the world’s biggest traders have expressed optimism that demand is making a comeback, while OPEC+ laggards are reported to be falling in line with supply cuts.
For the month so far, prices have traded higher on the back of signs that global economies were reviving after many businesses were shut down around the world for a couple of months to combat the spread of the coronavirus pandemic.