Washington Still Bullish over U.S./China Trade Deal, but Skeptics Cause Crude Prices to Fall

Long term forecasts of U.S. shale's might may cause further market angst: File Image/PixaBay

Monday's crude trading behaviour suggested that sideward trading will be maintained for some time, as the wait for a breakthrough in the U.S./China trade negotiations continues; and while two benchmarks incurred losses, they were tempered by a 1.2 million barrel drop in U.S. crude inventories in the week to November 8.

Phil Flynn, senior market analyst at Price Futures Group Inc., summarized Monday's lackadaisical trading session by remarking, "There were no real compelling stories to drive us over the weekend, and all of a sudden we have one piece of hard data that suggests that maybe oil supplies will fall this week" - a reference to the closure of the Keystone Pipeline following an oil spill.

Brent on Monday lost 33 cents to settle at $62.18 per barrel, while West Texas Intermediate fell 38 cents to settle at $56.86 per barrel.

While traders seemed less enthused by assurance from Washington over the weekend that a trade deal with China was imminent, other players in the energy sector overall are less concerned about current circumstances - and Suhail al-Mazrouei, energy minister for the United Arab Emirates, dismissed one of the key concerns of pundits when he stated at a conference that although greener energy will have a higher pace of growth in the future, oil and natural gas will grow as well.

Analysts may well hope the minister's prediction is accurate, given news emerging from Iran on Monday: Bijan Zanganeh, that country's oil minister, announced the discovery of the second largest oilfield ever discovered in the Islamic republic.

The Namavaran oilfield has an estimated 53 billion barrels of reserves - 22 billion barrels more than previously estimated; and Zanganeh said that about 2.2 billion barrels of oil have been added to the country's production capacity if there is a 10 percent recovery rate at the oilfield.

Another disclosure on Monday certain to spark concerns was the contention from Jason Bordoff, professor and director at Columbia University and a former adviser to president Barack Obama, that the U.S. shale revolution won't stop anytime soon.

He said, "I think the growth in production is going to slow but it's still growing, so we're still going to see the U.S. become a net oil exporter and put a lot of barrels on the market and that's really important."

Lorenzo Simonelli, chief executive of Baker Hughes, agreed: "U.S. production is still increasing, and even with the capex declines you've seen productivity and efficiency so a lot is going to be seen in 2020 with U.S. production."