Oil prices up as US-China trade talks loom, supply issues mount

Cornelia Mascio
Ottobre 9, 2019

The end of the USA summer driving season is also eroding demand, with hedge fund bets on a crude rally falling to an eight-month low.

"The two parties are going to sit down again this week and let's see what happens", said Tamas Varga, analyst at PVM Oil Associates.

Chinese officials are signalling they're increasingly reluctant to agree to a broad trade deal pursued by President Trump, and a move by the USA to place eight Chinese technology companies on a blacklist due to alleged human-rights violations may add to tensions between the two countries.

Brent crude rose by $1.09 a barrel to $59.46 on Monday, representing a 1.8% increase, while the US West Texas Intermediate (WTI) rallied by $1.06 to $53.87, up 2%. By 1:09 p.m. ET (1459 GMT) Brent was down 45 cents, or 0.8 per cent, at $57.90 a barrel and WTI was down 49 cents, or 0.9 per cent, at $52.26. "We are not ruling out a quick upward price reversal".

Oil gained after its biggest weekly slump since July ahead of the resumption of U.S.

USA stocks tumbled on Tuesday and the pan-European STOXX 600 index snapped a two-day winning streak to lose 1 per cent.

Iraq's oil exports of 3.43 million barrels per day (bpd) from Basra terminals could be disrupted if instability lasts for weeks, Ayham Kamel, Eurasia Group's practice head for Middle East and North Africa, said in a note.

International Monetary Fund (IMF) Managing Director Kristalina Georgieva warned that global economic deceleration could turn into "a more massive slowdown" without action to resolve trade conflicts and support growth. These are the updated targets and invalidation levels that matter on the oil price charts this week.

"The macro headwinds outweigh supply concerns for oil now, despite tensions in the Middle East and a reduced spare capacity pillow", said Stephen Innes, Asia Pacific market strategist at AxiCorp.

US stocks tumbled and the pan-European STOXX 600 index fell 1%.

Bottom line: Oil prices are approaching a multi-month support zone and leaves the immediate short-bias at risk while above the 51-handle. Analysts forecast crude inventories in the United States would show a fourth week of growth while gasoline stocks fell, a Reuters poll showed on Monday.

In Iraq, protests resumed overnight in Baghdad's Sadr City district. Riyadh said last week it had fully restored output. Installations belonging to Saudi Aramco were attacked on September 14, hitting output and triggering a spike in oil prices.

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