POTUS Optimistic on Chinese Negotiations
October 8, 2019
The energy market overall had a very uneventful day as it did manage to run up higher but as the day wore on it eased back and settled near unchanged on RBOB and up a little over a penny on HO and crude up 50 cents. Prices were up strong in the early morning trading upon the hope for a comprehensive US China trade resolution and outlook that OPEC’s oil output was down in September.
President Trump was optimistic that complete deal could be done and that fueled traders’ buying. But China’s Commerce Ministry later stated that it could reach a trade agreement on issues that both the US and China already agreed upon, but that it will set a timetable for more difficult issues to be worked out next year. This news sent the market lower.
The US blacklisted more Chinese’s firms and that also has put a negative vibe on the trade talks.
Reuter’s inventory outlook survey came out and it showed the expectation is for a build to crude stocks of 2.6 million barrels in tomorrow’s inventory report and that also put selling pressure on the market.
Japan’s Foreign Minister, Toshimitsu Motegi, said Japan and the US will sign a trade agreement on Monday in Washington, and that Japan aimed to bring it into force as soon as possible. US President Donald Trump, and Japan’s Shinzo Abe, agreed to a limited trade deal last month that cuts tariffs on US farm goods, Japanese machine tools and other products while further staving off the threat of higher US car duties.
Morale among investors in the euro zone fell in October to its lowest level in more than six years as stimulus measures taken by central banks failed to allay recession fears.
Russia’s Energy minister, Alexander Novak, said his country should reform oil taxation to bring into production some 10 billion tons of currently uneconomic reserves and increase producers’ margins to compete better with rivals such as US shale firms. He said oil production in Russia could fall if the tax system remained unchanged. He said Russia considers mid-term oil price of $50 per barrel as fair.
The current sentiment seems negative and is putting pressure on prices, but the bulls did defend that $51 to $50-dollar level pretty well three days ago as the market tested lower. The low that day was $50.99 and then buying drove the market back up. Maybe $50 will prove to be a good support level for crude for now. With supply concerns in Libya, Ecuador, Iraq and the North Sea these issues should lend support to prices.
German factory orders fell 0.6% in August on weaker domestic demand. Demand for capital good was down 1.6% and the reading for July was revised up to a fall of 2.1% from the previously reported 2.7% decline. All this points to economic problems in Europe and with it decreased energy demand.