Trade conflict and global growth curbing crude gains

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US crude, UK crude, global growth & trade conflict trending points

  • US oil supply keeps increasing despite export cut from Venezuelan state-owned oil firm PDVSA
  • US-China trade conflict alongside global growth fear have been keeping the crude oil price at a tight leash
  • Investors’ confidence has been deviously dampened, ahead of an uncertain Brexit outlook and sluggish global growth, that had already displayed its signs in major global economies China, Germany, Italy and UK.
  • Fed pause in the interest rate hike had also been another signal of slowing US economy despite solid financial foundation beneath forging ahead job growth sectors.

Crude oil looks to trade talk and global slowdown for direction

Following the reveal of faltered UK GDP of Q4, the Brent crude became dithered, while a downward momentum seems likely. While this report is being prepared, the 11thof February, GMT. 14.30, the Brent crude was down to $61.76 per barrel from a weekly opening price of $62.34 a barrel, and the US crude was being traded at $52.38 per barrel, down from a daily opening at $52.64.

Brent crude daily price chart

Brent crude daily price chart

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Global growth seems to be a talking point right now behind a bellicose outlook to risky assets like oil and at the same time, the US dollar keeps gaining, leaving the global stocks dried out in the wake of an emerging global growth fear.

Investors’ confidence had been curbed critically, since optimism over PMI and factory data of large economies such as China, Germany, Italy, UK and US displayed signs of steep decline. Concomitantly, the German and Italian economy had shown signs of contracts, since the Purchasing Managers’ Index point 50.0 level is considered as the break-even point for global growth. e

Amid unnerving worries of sagging global growth and a US-China trade that had yet to show signs of progress, crude oil may falter this week. However, the oil price would be kept in balance following declining output from Venezuelan PDVSA and a disputed Saharan oil field, which both the internationally recognized government of Tripoli and an administration established at east-Libya, claimed to be theirs. Following armed conflict surrounding the oil mine on last Wednesday, the 7thof February, crude output of one of the largest African oil fields remained stalled.

Bottom Line

Adding further strains in to the existing wounds, the Director of IMF (International Monetary Fund), Christine Lagarde cautioned the oil dependent economies of a seemingly upcoming volatility in oil price, and urged the nations to deduce funding on “White Elephant Projects”, expected to be funded by nation’s crude bypassing conventional budget ahead of a wobbling near-term outlook of crude price.

At this point, despite declined oil supply and OPEC-led output cut, the Crude oil price may keep falling and US-China trade talk seems to be a catalyst, while at the end of recent round of trade talk at February 15th, the crude market may gather momentum, only if the two economic superpowers could reach an agreement regarding much-debated intellectual property transfer rights.

In the meantime, it is highly unlikely for US and Brent crude to break the downbeat pattern and US and Brent crude may retest below $50 and below $60 a barrel respectively, in a near term outlook.

Read more on Crude here

[Disclaimer: The content of this article is personal opinion and should not be considered as investment advice or suggestion towards any trading activity.]

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