Changes in the oil market point to stabilization on January 17, with crude prices slightly increasing on Thursday and Friday.
Over the past weeks, the oil market has not shown a clear trend on whether prices will rise or fall.
China and the U.S. working on their differences
The market’s main catalyzers this January 17 include a truce between the United States and China. This truce has halted the trade war that confronted the world’s two largest economies (and two greatest oil consumers).
China gradually stopped purchasing American crude as the trade war started by the Trump Administration two years ago progressed.
This agreement also opens the possibility that China could purchase billions in U.S. energy products, according to Bloomberg.
Under the agreement, China will purchase $18.5 billion worth of energy products from the U.S. this year and another $33.9 billion in 2021.
The sales cover the full spectrum of fossil fuels and byproducts, from crude oil and liquefied natural gas, to a variety of fuels like coke and coal.
In addition to the beneficial effect on U.S. energy exports, the deal is also positive for various LNG projects that were stalled due to the freeze in bilateral relations.
Energy storage deployment reached a record level in 2018, nearly doubling from 2017. This makes it one of the few technologies on track under our Sustainable Development Scenario.
— IEA (@IEA) 17 de enero de 2020
Other Washington partners
On January 17, the news broke that the U.S. Senate approved the trade agreement between the United States, Mexico, and Canada (USMCA), which could also boost the country’s oil exports.
Mexico and Canada are by far the largest U.S. crude importers. According to the Energy Information Administration (EIA), their purchases amount to around 36 million barrels per month.
The two U.S. neighbors increased their consumption of U.S. crude and products from May to October 2019, the agency added.
Increasing crude production
Also relevant for the oil market was the fact that U.S. crude production continued to increase throughout 2019, and the trend has maintained in early 2020. Its output hit 13 million barrels per day last week, according to EIA weekly data.
This additional production is added to the news of the trade deals with China (which imports one to nine million crude barrels and products from the U.S.) and the USMCA.
In addition to its increasing output, the U.S. has been solving “bottlenecks” that have affected shipping.
Last year, three new oil pipelines connecting the prolific Permian basin and the U.S. Gulf coast began operations. These pipelines increased the nation’s oil transport capacity by nearly 2.5 million. Furthermore, it also plans to install new offshore docks in the coming years.
Primary #energy sources include fossil fuels (#petroleum, #naturalgas, and #coal), #nuclear energy, and #renewable sources of energy. #Electricity is a secondary energy source that is generated (produced) from primary energy sources. https://t.co/kDTUe7Jy7y pic.twitter.com/CHSlY0cTz2
— EIA (@EIAgov) 16 de enero de 2020
Prices could decline
The Energy Information Administration (EIA) expects average crude prices to be lower this year, due to rising stockpiles worldwide in the first semester of 2020.
By contrast, JP Morgan is expecting the oil market be in a deficit of 200,000 barrels per day this year, due to the OPEC production cuts and growing demand in emerging markets. Oil demand is expected to rise by one million barrels per day worldwide, which is consistent with most forecasts.
In the U.S. market, WTI stood at $58.73 on Friday afternoon, up by $0.21 (0.38%). Meanwhile, in London, Brent crude stood at $64.92, up by $0.30 (+0.46%).
|Oil Market January 17|
|Monday, January 13, 2020||$ 64,20||$ 58,08|
|Tuesday, January 14, 2020||$ 64,49||$ 58,23|
|Wednesday, January 15, 2020||$ 64,00||$ 57,81|
|Thursday, January 16, 2020||$ 64,62||$ 58,52|
|Friday, January 17, 2020||$ 64,92||$ 58,73|
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