Traders React to Trade News
December 16th, 2019
Baker Hughes reported that the number of rigs looking for oil increased for the first time in eight weeks as producers added 4 oil rigs bringing the total oil rigs to 667. Last year at this time the number of rigs was 873. Canadian producers added 9 rigs drilling for crude increasing their total to 96 compared with 95 a year ago.
The US and China announced a “Phase One” agreement that reduces some tariffs on Chinese goods in exchange for China’s increased purchases of American farm goods. In a press conference Friday night in Beijing, Chinese officials said the two countries have achieved major progress in their phase one trade negotiations and agreed on the text of a phase one deal. Under the agreement, the US will maintain 25% tariffs on about $250 billion of Chinese imports and reduce to around 7.5% tariffs imposed on $120 million of other Chinese imports. China will likely but $50 billion in US agricultural goods in 2020, double what it bought in 2017, before the trade conflict began. US President, Donald Trump, said his administration would leverage the remaining us tariffs on imported Chinese good as it seeks to negotiate a phase two trade deal with Beijing. Meanwhile, China’s Vice Commerce Minister said the first phase trade negotiations achieved major progress. Under the deal, China will increase its US imports of energy, agriculture, pharmaceutical products and financial services. China has agreed to suspend retaliatory tariffs, targeting goods ranging from corn and wheat to US made vehicles and auto parts, that were due to take effect on December 15th. China said reaching a trade agreement is in the interest to China, the US and the world.
The China trade deal is the biggest issues that will impact energy prices and right now optimism is high after the news on Friday and energy markets are higher this morning on this optimism. Proof that China plans to make good on its promises will have to show up to sustain this rally and that is down the road but for now things are good. There are some market analysts that think China has done this deal to avoid the tariffs that were to kick in on Sunday and that longer term their still think President Trump will not be reelected and they will have better chance of getting something done after the election. That means that China does what they can to avoid any more tariffs and make progress on phase one but beyond that will there be any more progress.
On Friday the US core retail sales (less autos and gas) for November came in flat with 0% growth for October. The market was expecting core retail sales to grow by 0.4% for November. Overall this is bad news and bearish influence for the market.