A fairly bland form of sabre-rattling, this time U.S. president Donald Trump threatening tariffs against Mexico over immigration concerns, was yet again the impetus for crude price losses on Monday, with Brent down 71 cents to settle at $61.28 per barrel, and West Texas Intermediate ending 25 cents lower at $53.25 per barrel.
Another all-too-familiar element motivating traders was Saudi Arabia, which helped mitigate losses by assuring traders it would continue working towards oil market stability in the second half of the year.
Jim Ritterbusch, president of Ritterbusch and Associates, summarized Monday's activity by stating in a note that "Focus has shifted from the supply to the demand side as a U.S.-China trade agreement has proven elusive and as worries over the debilitating effects of tariffs on global economic growth have now shifted to Mexico."
Francisco Blanch, Bank of America Merrill Lynch
Supply has been falling very quickly, but then again, so has demand
The analytical worries will likely continue for the near-term, given that Mexico on Monday said it would reject a U.S. idea to take in all Central American asylum seekers if it is raised at talks this week with the Trump administration.
The Saudis, which in the past have frequently expressed frustration that the analytical community is too focused on fleeting geopolitical events and day to day price fluctuations instead of fundamentals, once again on Monday tried to calm traders, with Khalid al-Falih, energy minister for the kingdom, calling recent trading volatility "unwarranted" and that cutbacks from the Organization of the Petroleum Exporting Countries (OPEC) would avert a supply glut and keep the market balanced.
But his remarks were largely ignored as other experts signaled the possible beginning of a bear market: Morgan Stanley and JPMorgan Chase & Co. both warned of a recession if Trump imposes 25 percent tariffs against Mexico on top of his escalating standoff with China; and Bank of America Merrill Lynch and Citigroup have lowered their U.S. corporate profit forecasts as well as warned of a risk of a downturn.
Francisco Blanch, global head of commodities research at Bank of America Merrill Lynch, told Bloomberg television, "What's been very difficult is that supply has been falling very quickly, but then again, so has demand."