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Stock and commodities markets

US-China Trade War Drops Oil Prices


 

The trade war between the United States and China is underway. Yet, it has already led to some consequences. For example, international experts say that this war has been the reason for the current weakness of the global market of cryptocurrencies. At the same times, Finanz experts claim that this trade war has dropped oil prices.
 
A couple of days ago, the price of Brent oil dropped down 6,69 dollars per barrel, which is the current 2-week low. In 24 hours, it has lost 1,8% and 4,1% since the start of the trading week. At the same time WTI oil has lost over 4,5% of its value. This is the second biggest daily price drop for the last 12 months.

Once again, they say that the key reason for this market drop is the trade war between the world’s two biggest economies, the USA and China. The other day, the USA revealed the list of 1300 Chinese products with increased import duties (up to 25% for some of them). In response, China did the same thing for American products to the amount of 50 billion dollars, including agricultural, automotive and airspace products from the USA.

Some experts claim that the trade war may seriously affect oil prices and therefore reduce to nothing all the efforts made by the OPEC+ participants to cut the global commercial inventories of crude oil and restore the market balance.

By the way, the OPEC+ deal got its status undermined seriously by the participants themselves. Firstly, Russian companies failed to comply with their obligations in March by cutting their daily production by 270K b/d instead of 300K b/d. Secondly, even though Saudi Arabia beat the target in March, the Saudis keep on dumping oil prices for Asian importers. At the same time, American oil companies keep on cutting down on their imports.

As a result, there is a big imbalance emerging in the market of oil futures today. The amount of long positions is 13 times as big as the one of short positions, which bring profit if oil prices go down. Others say that hedge funds may start selling out oil futures, which may bring Brent oil down to 60 dollars per barrel in Q2 2018.

 

 

 

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