Oil declines on global demand worries despite hopes on trade talks

US crude has traded similarly and is heading for its first loss in three weeks. (AP)
Updated 13 September 2019

Oil declines on global demand worries despite hopes on trade talks

  • Brent has traded in a range of nearly $5 this week and is heading for its first weekly loss in five
  • US crude has traded similarly and is heading for its first loss in three weeks

TOKYO: Oil futures fell on Friday as concerns about global growth and slowing demand lingered despite hints of progress on US-China trade talks, setting up prices for weekly losses after days of swinging back and forth.
Brent crude was down 18 cents, or 0.3 percent, at $60.20 a barrel by 0442 GMT, while US West Texas Intermediate (WTI) was off by 14 cents, or 0.3 percent, at $54.95.
Brent has traded in a range of nearly $5 this week and is heading for its first weekly loss in five. US crude has traded similarly and is heading for its first loss in three weeks.
Gloom over the economic impact of the trade dispute between Washington and Beijing has left investors shrugging off a strong commitment from Organization of the Petroleum Exporting Countries (OPEC) producers to trim output.
“Again, it is a battle between the forces of OPEC and those of slowing global growth and thus demand,” said Greg McKenna, strategist at McKenna Macro.
The weak confidence in the markets was reflected by economists in a Reuters poll who predicted the US-China trade spat will worsen or at best stay the same over the coming year.
Nearly 80 percent of more than 60 economists said US-China trade relations would either worsen or stay the same by the end of next year. The median probability of a US recession in the next two years held at a high of 45 percent, and the chance of one in the next 12 months held at 30 percent.
Still, President Donald Trump said on Thursday he would not rule out an interim deal with China on trade, though he prefers a comprehensive agreement.
Asian stocks advanced on Friday on the signs of progress in US-China trade talks, while aggressive stimulus from the European Central Bank also helped counter worries about a global economic slowdown.
In oil markets, however, concern over whether Trump can achieve progress on the trade dispute has overshadowed OPEC’s Thursday agreement to trim output by asking members Iraq and Nigeria to bring their production back in line with targets.
OPEC is striving to prevent a glut amid soaring US production and a slowing global economy.
OPEC+ has over-complied on average with its agreed cut of 1.2 million barrels per day (bpd) as Iranian and Venezuelan exports collapsed due to sanctions.
“With OPEC’s production curbs and ongoing constraints on sanctioned countries, we see the market tightening in Q4 2019. This should help stabilize prices,” ANZ Research said in a note.
“However, trade tensions and reduced risk of tougher sanctions on Iran and Venezuela will limit the upside,” it said.
Those trade tensions are hitting the shipping sector as the flow of goods and commodities slows, the International Energy Agency said on Thursday.
That will lead to weaker growth than previously expected in oil demand from the shipping sector next year despite a shift to cleaner fuel, the agency said.


Beijing tariff demands may expand US-China ‘phase one’ trade deal significantly

Updated 20 November 2019

Beijing tariff demands may expand US-China ‘phase one’ trade deal significantly

  • Beijing wants Trump to eliminate the 15 percent tariffs on about $125 billion worth of Chinese goods imposed on Sept. 1

WASHINGTON: A “phase one” trade deal between the United States and China was supposed to be a limited agreement that would allow leaders from both countries to claim an easy victory while soothing financial markets.
But it may morph into something bigger if US President Donald Trump agrees to Beijing’s demands to roll back existing tariffs on Chinese goods, people familiar with the talks say.
China’s commerce ministry said this month that removing tariffs imposed during the trade war is an important condition to any deal. The demand has US officials wondering if higher Chinese purchases of US farm goods, promises of improved access to China’s financial services industry, and pledges to protect intellectual property are enough to ask in return.
Two people briefed on the talks said Trump has decided that rolling back existing tariffs, in addition to canceling a scheduled Dec. 15 imposition of tariffs on some $156 billion in Chinese consumer goods, requires deeper concessions from China.
“The president wants the option of having a bigger deal with China. Bigger than just the little deal” announced in October, said Derek Scissors, a China scholar with the American Enterprise Institute in Washington.
Scissors, who consults with administration officials, said whether Trump will agree to remove existing tariffs depends largely on whether he believes it will benefit his re-election chances. Some White House advisers would like to see China agree to large, specific agricultural purchases, while the US maintains existing tariffs for future leverage.
That would help Trump’s farm belt constituency while allowing the president to campaign on maintaining his “tough on China” stance, which holds appeal to voters in key states like Ohio, Michigan and Pennsylvania.
But Beijing is balking at committing to a specific amount of farm product purchases, within a particular time frame, and wants to let supply and demand dictate deals instead.
Beijing also wants Trump to eliminate the 15 percent tariffs on about $125 billion worth of Chinese goods imposed on Sept. 1, as well as provide some relief from the 25 percent tariffs imposed on an earlier, $250 billion list of industrial and consumer goods.
One Washington-based trade expert said that to achieve the $40-50 billion in annual Chinese purchases of American farm goods touted by Trump in October, he would likely have to eliminate all of the tariffs the US put in place since the trade war started in 2018.
Trump and US Trade Representative Robert Lighthizer recognize that making such concessions for a “skinny” trade deal that fails to address core intellectual property and technology transfer issues is not a very good deal for Trump, a second person briefed on last weekend’s trade phone call said.
Trump is the final decision-maker in the US on any deal, and hasn’t committed to any specifics so far, White House advisers say.
The president said Tuesday that China “is going to have to make a deal that I like. If they don’t, that’s it.”
A ‘phase one’ trade deal, once expected to be completed within weeks of an October news conference between Trump and Chinese vice premier Liu He, could now be pushed into next year, trade experts say.