(Bloomberg) -- A rally that boosted crude prices more than 10% over the past two weeks could be in serious trouble if the U.S. and China don’t take a significant step toward resolving their trade dispute this weekend, according to JPMorgan Chase & Co.’s head of oil research and strategy.
Investors are looking for “meaningful” progress from the meeting in Japan between U.S. President Donald Trump and China’s Xi Jinping -- something more than merely resuming negotiations, Abhishek Deshpande said in an interview. Without it, Brent crude, now trading around $67 a barrel, could slide to $60 or lower, he said.
The two leaders’ confab at the G-20 economic summit will set the tone for next week’s meeting of the Organization of Petroleum Exporting Countries and other top crude producers. If there’s progress toward a trade deal, the OPEC+ group may just extend existing output curbs, Deshpande said. If not, they may have to announce “meaningfully deeper” cuts to reassure investors worried about a global oversupply.
“These two meetings really have to show something more positive to turn around investor sentiment,” Deshpande said. “It cannot be something that’s just a small change. I don’t think markets are in that mood, especially on the oil side. They really want to see something.”
Brent has risen 11% since June 12, largely due to rising tensions in the Middle East. But many investors remain pessimistic about economic growth and surging U.S. supplies, the analyst said. It will take “some kind of jolt” on both the supply and demand sides to get oil back near the $75.60 high point it hit in April.
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