Oil prices fluctuate due to uncertainty over US-China talks
11 June 08:35
Oil prices showed a decline during Asian trading sessions on Wednesday amid expectations of US President Donald Trump’s decision after trade talks with China. The market situation is complicated by weak demand for oil from China and OPEC’s plans to increase production, "Komersant Ukrainian" reports citing Reuters.
According to OilPrice.com, as of 8:27 a.m. Kyiv time, Brent crude oil futures fell by 5 cents, or 0.07%, to reach $66.82 per barrel. At the same time, U.S. West Texas Intermediate (WTI) rose by 2 cents (0.03%) to trade at $65 per barrel.
A breakthrough in US-China trade relations
U.S. and Chinese officials have reached an agreement on a framework agreement that should restore a trade truce between the world’s two largest economies and address Chinese export restrictions on rare earth metals and magnets. This was announced by US Secretary of Commerce Howard Luthnick on Tuesday after two days of intense negotiations in London.
“The current price corrections can be explained by a combination of technical profit-taking and caution ahead of the official announcement of the results of the US-China talks,”
– commented Priyanka Sachdeva, Senior Market Analyst at Phillip Nova.
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Impact on oil markets
Tony Sycamore, market analyst at IG, assesses the potential impact of the deal on the oil sector:
“I think it removes some downside risks, especially for the Chinese economy, and stabilizes the situation for the US economy. Both factors should support the demand for crude oil and its price.”
Expectations for US stockpiles
Later on Wednesday, markets will be focused on the weekly report on US crude oil inventories from the Energy Information Administration, the statistical arm of the US Department of Energy.
According to market sources, citing figures from the American Petroleum Institute released on Tuesday, crude oil inventories fell by 370,000 barrels last week.
Analysts polled by Reuters on Monday had expected U.S. crude stockpiles to have fallen by 2 million barrels in the week ended June 6, while distillate and gasoline stockpiles were likely to have risen.
Forecast
OPEC plans to increase oil production by 411,000 barrels per day in July, continuing to reduce production restrictions for the fourth consecutive month. Some analysts doubt that regional demand will be able to absorb these additional volumes.
“Growth in oil demand in OPEC economies – most notably in Saudi Arabia – could offset additional supply from the group in the coming months and support oil prices. However, given that any increase in demand will be seasonal, we still believe that Brent prices will fall to $60 per barrel by the end of this year,”
– said Hamad Hussein, Capital Economics’ climate and commodities economist, in a research note.
Experts note that the current situation in the oil markets is characterized by a struggle between positive signals from the US-China trade talks and negative pressure from increased supply from OPEC. The final impact on prices will depend on how effectively the global economy can absorb additional volumes of oil on the market.
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