WTI and Brent oil price are trading lower by -0.30% at $52.50 and $58.10 respectively during the start of the Wednesday’s European trading session as the relationship between China and the U.S. continues to deteriorate after the latest tit-for-tat restrictive measures between the two countries despite the coming US-China trade negotiations starting by tomorrow.

 

US-China negotiations:

Energy investors are focusing on the highly expected US -China trade talks which are set to take place at Washington, USA on this Thursday-Friday and it would include high-level negotiators such as the Chinese Vice Premier Liu He, the U.S. Trade Representative Robert Lighthizer and the US Treasury Secretary Steven Mnuchin.

 

Sour start of Trade Talks:

Crude oil prices lost more than 2% since Monday as the US -China relationship deteriorated after Trump administration blacklisted 28 Chinese companies together with Visa restrictions on some Chinese officials as punishment measures to Beijing for human rights violations and manipulations against Uighurs, Kazakhs, and other members of Muslim minority groups in China.

The Chinese government responded by blocking the NBA basketball games in the China’s state broadcaster CCTV after the NBA Commissioner Adam Silver gave an interview supporting Houston Rockets general manager Daryl Morey’s tweet in support of pro-democracy protesters in Hong Kong. Furthermore, China is planning visa restrictions for U.S. military- and CIA-linked institutions, rights groups and their employees.

The latest tit-for-tat restrictive measures between the two countries comes only one day before the start of their talks, increasing the tension and complicating the effort to reach an agreement which might ease the global economic slowdown and the boost the crude oil demand.

 

Crude oil demand outlook is darkening:

The oil prices have lost all the gains since the attack on the Saudi’s oil infrastructures at September 14 as the energy investors worry more for the slowdown in the global oil demand growth which has influenced by the long-lasting trade dispute, the slowdown in the global manufacturing, Brexit uncertainty rather than the geopolitical supply risks.

The pressured crude oil prices act as “mirror effect” of the fear for recession risk amid the ongoing trade dispute between the two largest economies of the world, the US and China. The oil prices have influenced by the maximum from the slowdown of the global trade as it demonstrated from the recent contraction in the US, German, Japan, China, UK and Eurozone’s Manufacturing & Service sector amid the lower export orders and lack of demand.

 

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Vrasidas Neofytou

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