Oil prices fell today as the US-China trade conflict continues to impact the growth prospects for the global economy and dampen demand despite a resumption in negotiations to resolve the 15-month dispute.
The trade conflict has not only disrupted supply chain, but also and slowed down growth prospects in these economies. China, which is the world’s largest importer of oil, has lowered expectations of a reconciliatory deal through the talks with the US.
US President Donald Trump, on the other hand, has proposed to raise tariffs on around $250bn of Chinese goods to 30% from 25% on 15 October in case the talks show do not lead to any progress. Global benchmark Brent crude futures LCOc1 dropped by 37 cents to touch at $57.95 a barrel, while US West Texas Intermediate (WTI) futures CLc1 fell 26 cents to reach at $52.33, reported Reuters.
BNP Paribas oil strategist Harry Tchilinguirian was quoted by Reuters as saying: “No two ways about it, U.S.-China trade talks will be front and centre on the agenda across global markets, including oil.”
“This jitteriness just goes to show how much emphasis the market places on the outcome of these talks in terms of the global economic outlook.”
The two benchmarks dropped by over 20% from their peaks in April 2019. Prices also reduced due to growing inventories in the US, which is the world’s largest oil producer. US crude inventories increased by 2.9 million barrels in the week to 4 October 2019, the Energy Information Administration (EIA) said on Wednesday.
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Furthermore, the Organization of the Petroleum Exporting Countries (OPEC) adjusted its production agreement to enable Nigeria to increase its output, thereby leading to a supply glut in the global market. OPEC member Venezuela also plans to boost its exports despite US economic sanctions.
Indian refinery company Reliance Industries intends to start loading crude from Venezuela following a four-month stop.
Tamas Varga of oil brokerage PVM told Reuters: “The oil market is neither bullish nor bearish. It is not trending. It has no reason or excuse to trend.
“It would be stretching it to say that the market is paralysed, but it is in a stalemate. No one is willing to commit to either direction.”