Energy Demand Growth Slowing in China and India
November 8, 2019
Crude oil and refined fuel product prices closed higher yesterday, which was mainly driven by news that the US and China have agreed to a framework for the phase 1 trade deal. The Chinese Commerce Ministry said yesterday that China and the US have agreed to cancel some tariffs in place in good faith of signing the phase 1 trade deal. This helped to boost markets yesterday. Reuters reported on Tuesday that the US may roll back $112 billion on Chinese imports tariffs to seal a phase 1 deal. This also helped push equities to record highs and supported oil prices. This market is just waiting on these types of headlines. Late yesterday Reuters reported that some high-level US officials said there was internal opposition to reducing tariffs and no final decision has been made. The flip side of the China and US trade deal is more in the spotlight today and the energy market is trading lower as it is Friday and some traders are likely taking profits. The markets will continue to react to the news as the China and US trade negotiation are the biggest news that will drive markets. To add some positive support to these trade talks the market wants to see the news of when and where President Trump and President Xi will meet to sign phase 1 deal.
India and China have been big factors in estimates for energy growth far into the future. With global economic conditions and the trade war, energy demand from these two countries has declined. Reuters reported that growth in demand for fuel in India is on course to fall it its lowest level in at least the last six year as the economy slows and after heavy rains impacted gasoil consumption.
The energy market is still trading in a range and really has not broken out. In the last two trading session WTI crude did trade above its 200-day moving average but has been unable to close above it. That is likely helping traders take some profits here in early trading. The market is showing no real conviction and likely needs some big event or concrete breakthrough in the trade deal to move the market out of its trading range and start a trend. The bears are the one currently that need to get to work and move this market to the downside if there is going to be a move lower in these markets I the coming months.