By Adedapo Adesanya
Oil prices may experience decline this week despite the progress made in the US-China trade deal, which has seen demand for oil take a hit and had in turn impacted strongly on oil prices.
However, this issue also lent support to prices last week as session received massive backing spurred by progress in the talks, increasing US crude supply, and the potential of a deeper cut in production from oil producers in OPEC.
The international oil benchmark, the Brent, charted around $63 last week, trading around $62.95 per barrel, following reports that the United States and China have announced plans to remove tariffs placed on imports.
But this saw a fallback when analysts unveiled that China might have made too many concessions as part of the deal, while the US was not on the same page, as evident in President Xi Jinping saying that without this, a visit to the US will not be possible.
As market resume today for the week, it is anticipated that uncertainties over venue for the signing of the trade deal between both nations would take a toll on oil prices. Last week, there were reports of a delay in the striking of the truce until December over terms and venue, causing a drop in major futures.
Prices were also pressured by the news that US inventories rose 7.9 million barrels the week-ended November 1, as producers cut output and exports fell according to a report by the Energy Information Administration (EIA) on Wednesday. Traders had been looking for an increase of 1.5 million barrels.
On the OPEC front, Business Post had reported that the cartel and its allies hinted that there could be deeper production cuts from its members and allies in an effort to balance the impact of falling oil demand. However, comments from the body last Tuesday expressed doubts on whether the cartel and its affiliates will have to cut output.
According to the Secretary-General Mohammad Barkindo earlier last week, he was more optimistic about the outlook for 2020 because of potentially positive developments on trade disputes, appearing to downplay any need to cut output more deeply.
Looking at this week, concerns on the direction of the phase one agreement will help oli prices especially if the date and the venue of the signing are announced.
Also, OPEC dedication to production cuts will also add to oil prices gains but this could be limited if data from the American Petroleum Institute (API) and especially the Energy Information Administration (EIA) on Wednesday shows another increase in U.S. supply.
As at the time of this report, Brent Crude is currently trading down at $61.89 while the West Texas Intermediate is down more than 1 percent down at $56.62.
