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US-China trade war renders repercussions over crude oil demand. Crude tips

Uploaded Date 11-Nov-19
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One of the factors that affect oil prices in the present times is the Washington –Beijing trade deal. As tensions de-escalate among the two of the top economies in the world, oil prices and stocks will achieve higher degrees of stability.


If a trade deal between the US and China materializes, it may boost the demand for oil. China is presently insisting that US President Donald Trump removes the additional tariffs that were imposed in September. This would be phase 1 of the US-China trade deal.


Postulated effects dismantling tariffs imposed over China


Let us suppose that a few of the prevailing tariffs are dismantled. This will restore the global demand for oil to a certain extent, as a result of improvement in trade and economic conditions.


Oil prices are going to be under pressure


Going by a Reuters’ survey, we can estimate that the oil prices will be under pressure for the year. The results of the survey reveal that Brent crude will average $64.16 a barrel for the year 2019 and $62.38 for 2020.


Another Reuters Survey has figured out that in October, oil output from the Organization of Petroleum Exporting Countries (OPEC) has recovered from an eight-year low. This is accompanied by Saudi Arabia’s recovery from the attacks that had taken place over its oil infrastructure in September. Saudi Arabia has offset the losses that took place in Ecuador and has overcome the voluntary curbs that were posed upon it, via an international supply pact.


US Commerce Secretary Wilbur Ross has expressed that phase one of the trade-pact with China is in a good shape. This will be signed in mid-November in all likelihood and takes away the worries associated with global oil demand and economic growth.


With the trade war between the US and China, resultants have been reflecting over the prices. It has bought to fore the fears that with the slowdown in economic growth, the demand for oil would suffer as well.


Till now, the US-China truce has not reached solid ground. Even if the phase 1 of the deal is signed in this month, existing tariffs will remain. The prevailing economic conditions at a global scale will not rebound in entirety.


Thriving U.S. and Chinese economies augur well for global oil demand


A few of the factors in support of the prices is the factory activity in China. This is now expanding at the fastest pace since 2017. The health of the world’s second-largest economy hence seems to be good.


But the manufacturing activities of other top players in North Asia have been on a low. They include Japan, North Korea, and Taiwan, and slumping global demand has laid an influence over the nations’ manufacturing activity.


US job growth has also slowed down. But it was less than expected, and consumers are expected to keep the slowing down economy alive for the time being.


In August, US crude production was at 600 thousand barrels per day. The total came to a record 12.4 million barrels. A 30% increase in the Gulf of Mexico output was one of the key underlying factors leading to the development.


At the beginning of November, oil prices rose in the hope of progress of US-China trade talks.


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