Oil Steadies on Signals Trump May Expand Trade Offensive
Three-phase spheroids stand behind pipelines at Saudi Aramco’s crude oil processing facility, in Abqaiq, Saudi Arabia. (Photographer: Dina Khrennikova/Bloomber)

Oil Steadies on Signals Trump May Expand Trade Offensive

(Bloomberg) -- Oil ended slightly lower amid concern that U.S. President Donald Trump may expand his trade offensive, multiplying the economic headwinds already threatening global energy demand.

Futures fell 0.1% in New York on Tuesday after earlier rising as much as 1.2%. As Trump addressed the New York Economic Club, analysts listened for indications about the pace of trade negotiations with China. Meanwhile, the U.S. trade czar prepared to give the president ammunition to hit some European nations with targeted sanctions.

The U.S.-China trade war is casting a pall over the the global growth that underpins energy demand. Morgan Stanley and PVM Oil Associates Ltd. warned that crude prices will slump next year unless OPEC and allied oil producers deepen output cuts.

“We were big on early morning optimism that Trump would have something to say about the trade negotiations,” said Bob Yawger, futures division director at Mizuho Securities in New York. “He didn’t say if anything bad was going to happen or anything good for that matter either so the market was disappointed.”

Oil Steadies on Signals Trump May Expand Trade Offensive

Morgan Stanley said the international crude benchmark may tumble by almost 30% to $45 a barrel if the so-called OPEC+ alliance doesn’t make steeper supply cuts. Citigroup Inc. and BNP Paribas SA predicted a slide to the low $50s.

“If we don’t make a deal, we’re going to substantially raise those tariffs,” Trump said. “They’re going to be raised very substantially. And that’s going to be true for other countries that mistreat us too.”

West Texas Intermediate for December delivery fell 6 cents to settle at $56.80 a barrel on the New York Mercantile Exchange.

Brent for January delivery fell 12 cents to close at $62.06 on the London-based ICE Futures Europe Exchange, and traded at a $5.21 premium to WTI for the same month.

Oil Steadies on Signals Trump May Expand Trade Offensive

The OPEC+ group will meet in Vienna on Dec. 5 and 6 amid questions over whether the biggest producers will be pushing for more output reductions. Saudi Arabia appears to have little appetite for further sacrifices, while others in the alliance -- particularly Iraq and Nigeria -- haven’t delivered on their current commitments. Russia has also signaled it’s not keen on additional cuts.

“The oil market is in a holding pattern -- it cannot make up its mind which way to go in future,” said Tamas Varga, an analyst at PVM in London. “All OPEC can do is decrease their output next year if they are serious about reducing stocks. Anything else would send out the wrong message.”

Other oil-market news
  • Gasoline futures were little changed to close at $1.6144 a gallon.
  • Saudi Arabia is looking at new ways to promote the use of oil and natural gas as electric vehicles and climate concerns could curb consumption of the fuels, the kingdom’s oil minister Prince Abdulaziz bin Salman says at a forum in Riyadh on Tuesday.
  • Offshore oil production is expected to hit a peak in 2020 before joining the shale industry in a slowdown that could dramatically rewrite market supply predictions.
  • The price range in Saudi Aramco’s initial public offering will be announced on Nov. 17 and the final share price set on Dec. 5.
  • Repsol SA is looking as far away as Western Canada for oil for its European refineries amid dwindling supplies from Mexico and Venezuela.

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