Oil Prices Dip amid Trade Deal Concerns
Oil prices slipped on Wednesday ahead of the signing of the Phase One trade deal between the US and China.
Concerns appeared after the US Treasury Secretary Steven Mnuchin said tariffs on Chinese goods would stay until the ‘phase two’ of the deal is complete. It essentially also meant the duties would remain until after the elections.
Brent crude lost 16 cents or 0.3% at $64.33 per barrel. Meanwhile, US West Texas Intermediate crude futures lost 15 cents or 0.3% at $58.08 per barrel.
Commodities investors took the news as a sign that demand may not fully recuperate even after phase one deal.
One analyst said the financial markets, including oil traders, were “disappointed.”
Later in the day, US President Donald Trump will sign the interim trade deal with Chinese vice Premier Liu He.
The text and precise details of the deal remain under wraps. However, markets expect the agreement to include provisions for Chinese purchases of $50 billion more in US energy supplies.
Markets also expect the lifting of significant tariffs will depend on whether China comes through on their pledges.
US Crude Oil Inventories Rise
Elsewhere in commodities news, US crude inventories gained 1.1 million barrels, according to data from the American Petroleum Institute. This result countered the market’s expectations for a draw.
Meanwhile, the US Energy Information Administration said production might rise further in 2020. The expectations are at 13.30 million barrels per day. And the main drivers would be the higher output of Texas and New Mexico.
Meanwhile, key OPEC+ members have started discussions of a possible delay in a decision regarding their existing output cut.
News from Russia’s TASS news agency cited an unknown source and said the delay could be until June. Before that, OPEC wouldn’t decide on whether to extend the oil output cut.
The curbing deal will expire in March. And if they delay the meeting to June with no extension to the agreement, there would be second-quarter surplus. This scenario will be bearish for the commodities market.
However, analysts said that keeping the deal until the June meeting would be better for the markets. They described such a scenario as “more constructive for the markets.”
As for other commodity news, gold prices were up after a two-day losing streak. The precious metal typically perks up in value in times of uncertainty and risks. US Gold Futures climbed 0.6% to $1,553.15.
