Trade Deal Could Send Oil To $75

Catogory : Market Report

While OPEC and its allies successfully reached a deal to extend its production cut quotas into 2020, the oil price response was markedly disappointing, leaving the market to wonder if oil prices will ever recover much beyond the levels that they are today. Leading up to the most recent OPEC meeting, the Brent barrel was trading at a hair over $66. The market had already priced in an extension of some sort, not many were calling for prices to fall in a notable way. But prices did just that, falling to just above $62 on a weakened global demand outlook. A crude oil inventory drop of 5 million barrels was able to stop the dramatic price slide that saw prices off 5%.One thing that may have the power to lift oil prices out of the low $60s, however, is an end to the US/China trade war, which has helped to dampen oil demand growth prospects. In fact, one expert is calling the trade talks between the US and China the decisive factor in the oil price outlook this year, the second-half of the year (demand) outlook looks better but so much depends on the trade deal, on the truce between the U.S. and China, and global demand has slowed down considerably. The truce over the trade talks over the weekend may restore fuel demand. If, however, that demand isn’t restored quickly, weak prices will persist through H2 2019 and even 2020. Saudi Arabia, for one, is reportedly banking on oil above $75. In fact, some say it is banking on $80 oil—the minimum amount that the Saudi’s budget needs to breakeven, according to sources. This perceived do-or-die moment for Saudi Arabia has led many to believe that this was behind the successful agreement reached by the cartel. But this successful agreement fell short of lifting prices in the immediate term.