U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading sharply lower shortly before the cash market opening on Wednesday as renewed worries over the prospects for a trade deal between the United States and China over the near-term dwindled. Today’s developing “risk-off” trading session also suggests investors are rekindling their concerns over a global recession, and a drop in global energy growth.
Trump Sparks Renewed Concerns over Trade Agreement
U.S. President Donald Trump may have ignited a fresh round of worries when he said on Wednesday that the two countries were close to finalizing a trade deal, but he fell short of providing a date or venue for the signing ceremony, disappointing investors.
Trump also said the U.S. will increase tariffs on China in case the first step of a broader agreement isn’t reached.
“If we don’t make a deal, we’re going to substantially raise those tariffs,” he said Tuesday in a speech to the Economic Club of New York. “They’re going to be raised very substantially. And that’s going to be true for other countries that mistreat us too.”
Earlier in the week, Trump said he will only accept a deal if it is good for his country and U.S. workers. Furthermore, he added, he had not agreed to rollback tariffs despite last week’s claim by China that the two economic powerhouses had agreed to rollback tariffs in phases.
Slower Global Oil Demand Predicted
A forecast by the International Energy Agency (EIA) for slower global oil demand growth post-2025 also weighed on the market.
Global oil demand is expected to grow by 1 million barrels per day (bpd) on average to 2025, but is forecast to slow to 100,000 bpd a year from then on as fuel efficiency improves and more electric vehicles hit the road, the IEA said in its annual World Energy Outlook for the period to 2040.
Crude oil prices are likely to remain under pressure all session if there is no breakthrough in U.S.-China trade relations.
We’re also looking for the possibility of heightened volatility late in the session with the release of the American Petroleum Institute (API) weekly storage report at 21:30 GMT.
Crude oil inventories were forecast to have risen for a third straight week last week, while refined products inventories likely declined, a preliminary Reuters poll showed on Tuesday.
Five analysts polled by Reuters estimated, on average, that crude inventories rose around 1.6 million barrels in the week to November 8.
ANZ analysts said the prospects for U.S. crude exports had turned bleak after shipping rates jumped last month, causing inventories to stay above both last year’s level and the five-year average.
This article was originally posted on FX Empire
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