Critics reiterate the need for a trade deal between the U.S. and China: File Image/Pixabay
Friday's crude trading was a repeat of past end-of-week performances, with sentiment causing West Texas Intermediate prices to to surge by 2.7 percent - but still not enough to ward off a third straight week of declines overall.
After Khalid al-Falih, energy minister for Saudi Arabia, told a news conference in Russia that the Organization of the Petroleum Exporting Countries (OPEC) was close to agreeing to extend its production cuts to the end of this year, WTI settled up $53.99 per barrel and Brent also rose 2.7 percent to $63.33 per barrel.
Al-Falih remarked, "On the OPEC side, a rollover is almost in the bag; the question is to calibrate with non-OPEC, [but] I don't think there will be a need to deepen the cut."
Khalid Al-Falih, energy minister, Saudi Arabia
A rollover is almost in the bag
Al-Falih also stated that he's unwilling to engage in a race to increase oil output in order to compensate for lower prices and that a return to the price-crash environment of 2014-15 is unacceptable.
Thamer Ghadhban, oil minister for Iraq, also said at the same conferencethat OPEC and its allies were most likely to extend their global oil output deal and that the cartel would assess the situation when it holds a policy meeting in a few weeks (the current deal expires at the end of June).
Still, OPEC is widely viewed as a band-aid and not a solution that will prevent crude from spiraling into a bear market; Tamar Essner, director of energy & utilities at Nasdaq, pointed out that "The zeitgeist of the oil market is that it wants to track the broader macro environment; a lot hinges on what the outlook for the global economy looks like, which really hinges on a trade deal" - referring to a deal between the U.S. and China.
Meanwhile on Friday, U.S. president Donald Trump, who contributed to a fair bit of this week's trading volatility by threatening to impose tariffs against Mexico, tweeted that there's a "good chance" the U.S. will reach an agreement averting new tariffs on Mexico before a Monday deadline.
But analysts warn that as far as they're concerned, one thing is certain: the lack of a trade deal with China, combined with the animosity against Mexico, will likely plunge the global economy into a recession - and Stephen Schork, president of the Schork Group, told Bloomberg radio on Friday that this in turn could cause oil to go "well below $40" per barrel.
He also noted that if OPEC takes a "hawkish stance" by continuing to take barrels off the market, prices could escalate to as high as $75-$85 "but that only increases the chances of killing demand down the road on the risk of the global economy going back into recession."