Oil on the rise after the Sino-US trade agreement

  •   18/01/2020 - 09h37
  •   Adeline HARMANT

This Thursday, January 16, 2020, we have seen a rise in the price of Crude Oil following the ratification of a trade agreement between China and the United States. We invite you to learn more about this news and its effects on the raw materials market.

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Oil on the rise after the Sino-US trade agreement
Image copyright: anax44 - Flickr

The barrel gains points following the ratification of the trade agreement:

We therefore saw, during Thursday's sitting, a rise in the price of a barrel of oil, while the ratification, in the United States, of the new free trade agreement following the signing of a preliminary trade agreement between the United States and China took place.

In fact, at the end of the session, a barrel of Brent oil ended at $64.62 on the London market, which represents an increase of 1% or 62 cents compared to its closing of the day before. On the New York market, a barrel of WTI oil gained nearly 1.2% or 71 cents at $58.52 per barrel.

During Wednesday's session, Brent crude oil lost 0.8% and WTI fell by 0.7%, mainly due to the publication of rising U.S. refined product inventories and a record increase in oil production in the United States.

During Thursday's session, the most important news of course was the final approval of the agreement between the United States, Mexico and Canada following Thursday's vote in the Senate. This new yours comes shortly after the signing of the trade treaty between the USA and China, bringing a truce in the trade war between the two countries.

 

How is oil likely to behave in the longer term?

Let us now turn our attention to how the price of oil might behave in future sessions. It should be noted that the current rise in prices is mainly due to market optimism following the agreement between China and the United States.

In fact, while Beijing has committed to buying an additional $200 billion in U.S. products over the next two years, more than a quarter of that amount will be spent on energy products, of which crude oil is of course a part. This is therefore good news that should continue to stimulate demand appetite, especially since the tariffs still in place for US oil imported into China should soon be lifted.

Of course, this bullish forecast is also based on other data, including an increase in demand for 2020 estimated by OPEC. However, care will be taken to closely monitor data from production which should guarantee market supply in the absence of new clear threats in this sector.