Oil Up Again As U.S., China Seemingly On Verge Of Signing Trade Deal

Meanwhile, the U.S. is set to become a sustained net oil exporter: File Image/PixaBay

For a sitting U.S. president who has widely been dismissed as untrustworthy, it's remarkable the trust the crude trading community places in even Donald Trump's vaguest remarks, such as the one he made on Thursday that Washington is close to making a trade deal with China, which in turn caused oil to gain nearly 1 percent.

Trump tweeted on Thursday that his country was very close to a big deal with China after earlier stating that he was considering a delay or possible cancellation of tariffs scheduled to go into effect on Sunday; for its part, China’s commerce ministry said Beijing and Washington were in close communication.

Trump's tweet was augmented by a source briefed on talks between the two nations who disclosed that a “phase-one” trade deal has been reached and a statement from the White House was expected soon.

Consequently, Brent rose 48 cents to settle at $64.20 per barrel, and West Texas Intermediate rose 42 cents to settle at $59.18 per barrel.

Gene McGillian, vice president of market research at Tradition Energy, was guarded in his optimism: “It seems to be close, but we’ve all been waiting for this deal to happen.”

Meanwhile, the analytical community on Thursday was busy doing what it does best: disseminating conflicting views about the state of the crude market moving forward.

The International Energy Agency stated on Thursday in its monthly report that  “Despite the additional curbs [from the Organization of the Petroleum Exporting Countries]... and a reduction in our forecast of 2020 non-OPEC supply growth to 2.1 million barrels per day (bpd), global oil inventories could build by 700,000 bpd in Q1 2020.”

Giovanni Staunovo, analyst at UBS, agreed: "The oil market is likely to be oversupplied in 1H20."

However, OPEC’s own research  forecasts a small deficit in the market next year due to Saudi Arabia’s supply restraint even before the latest cut agreement takes effect.

Relatively downplayed in Thursday's market news was a major milestone for the U.S.: according to the IEA, the U.S. will become a sustained net oil exporter in either late 2020 or early 2021.

However, the IEA added that this does not mean that energy independence has been achieved: The United States remains a major crude oil importer.”