International oil prices fluctuated within a narrow range. Oil prices edged higher on Monday, holding near two-month highs, as investor optimism grew over a settlement in protracted international trade disputes.
Positive remarks from the two largest economies have renewed optimism in global markets that the world’s two largest economies may soon sign a phase one trade deal to end the trade dispute. Coupled with the U.S. stock market reaching new highs, OPEC+’s expected extension of production cuts in December and the geopolitical situation in the Middle East, all have supported oil prices.
International trade reports are positive, supporting optimism about oil prices
U.S. National Security Advisor O’Brien said on Saturday that it is still possible to reach a phase one trade agreement before the end of the year. U.S. President Trump also expressed his desire to sign a phase one trade agreement last Friday to ease the 16-month-old trade dispute.
Both major economies are looking to put an end to a 16-month-old tariff dispute, providing a welcome boost to financial markets.
On the morning of November 26, Liu He, member of the Political Bureau of the CPC Central Committee, Vice Premier of the State Council, and Chinese leader of the China-US Comprehensive Economic Dialogue, had a phone call with US Trade Representative Lighthizer and Treasury Secretary Mnuchin. The two sides discussed resolving each other’s core concerns, reached consensus on resolving relevant issues, and agreed to maintain communication on the remaining matters of the first-phase agreement negotiation. Minister of Commerce Zhong Shan, Governor of the People’s Bank of China Yi Gang, Deputy Director of the National Development and Reform Commission Ning Jizhe and others participated in the call.
U.S. stocks hit new highs, boosting demand for crude oil
U.S. stocks closed at new highs, with the S&P 500 Index, Dow Jones Industrial Average The index and the Nasdaq Composite hit record highs, buoyed by optimism about international trade relations and a fresh wave of merger and acquisition activity.
Adam Phillips, head of portfolio strategy at EP Wealth Advisors, said, “If the market and economic outlook is not optimistic, I don’t think we will see these types of transactions, which is another indicator that we can see the market The outlook is a positive sign.”
While doubts about the rally remain and safe-haven assets like bonds appear to be well supported, But global stocks are approaching a third consecutive month of gains. The market is relatively optimistic about the occurrence of a phase one trade agreement, but it is clear that there is still more uncertainty before the agreement is officially signed.
The recent trend of oil prices has a strong positive correlation with the stock market, because a higher stock market will improve investors’ optimistic expectations for global economic growth, thereby benefiting crude oil demand and supporting higher oil prices.
Focus on the December OPEC+ meeting, extending production cuts is expected to support oil prices
OPEC will hold a meeting at its headquarters in Vienna on December 5, followed by OPEC+ talks with other oil-producing countries led by Russia. OPEC+ is widely expected to extend its production-cut deal until the middle of next year, with non-OPEC producer Russia backing Saudi Arabia’s efforts to stabilize oil prices as state-owned oil giant Saudi Aramco goes public. Affected by this news, international oil prices rose to their highest point in two months last week, and then fell slightly.
According to media reports citing anonymous OPEC officials on the 21st, OPEC+ may extend the crude oil production reduction agreement that will expire at the end of March next year to June 2020. Although it seems unlikely to increase production cuts now, OPEC+ may send a message to the market about strengthening the implementation of the production reduction agreement.
In fact, oil demand is not only strong, but is growing better this quarter than in the previous quarter. With the implementation of economic stimulus measures in many countries and OPEC stating that it will extend the production reduction agreement, the entire oil supply system may experience supply shortages.
Iran’s tough response to US sanctions affects the oil market in three ways Possibility
Iranian President Rouhani recently stated that Iran’s economy has been in trouble since the United States imposed sanctions on Iran last year. However, Iran’s current economic indicators are improving, which proves that the United States’ maximum pressure policy has failed. But analysts believe that Iran is still in trouble.
In response to the U.S. Treasury Department’s announcement of sanctions against Iranian Minister of Information and Communications Technology Mohammad Jahrumi, Jahrumi himself posted a message on social media on the 22nd in response, saying that he was not the only one. People on the U.S. sanctions list – the United States has sanctioned many Iranians before this, and even Iranian cancer patients have become targets of U.S. sanctions.
In the future, we will continue to promote Internet coverage in Iran and will not allow the United States to succeed in its conspiracy to hinder Iran’s development. Earlier on the 22nd, the U.S. Treasury Department announced sanctions against Mohammad Jahrumi, and all assets of Jahrumi within the jurisdiction of the United States will be frozen.
There are reports that a military conflict between the United States and Iran may lead to a surge in oil, but the possibility of a major conflict between the United States and Iran is relatively low. The situation between the United States and Iran will have three outcomes.
The first is the significant increase in Iran’s attacks on oil tankers in the Persian Gulf and the Gulf of Oman. Similar to �The tanker wars of the 1980s would have had a “small, short-term” impact on supply and led to an immediate but limited spike in oil prices.
Second, Iran attacks the oil infrastructure of Saudi Arabia and the United Arab Emirates. On the basis of the September 14 oil attack, there could be a loss of 5.5 million barrels of supply. But research shows that the surge in oil prices may not last long either, as oil prices will return to the $65-$75/barrel range within a year.
The third type is the escalation of the conflict between the United States and Iran. Including significant damage to Saudi and Emirati energy infrastructure and the closure of the Strait of Hormuz, which would result in a loss of 24.8 million barrels of supply, about a quarter of global supply, oil prices would immediately surge. The report said that within a year, oil prices will fall back to the range of US$80 to US$100 per barrel.
It is worth noting that despite the escalation of tensions in the Middle East, the results that are expected to have a significant impact on oil prices are unlikely to materialize. Only in more extreme scenarios, where sharp changes in oil prices would occur, would there be significant safety concerns and severe public reaction. </p
