Crude Oil Rally Halts Despite US-China Trade Deal Optimism

On November 04, 2019, Oil price rally halted as traders booked profit ahead of key economic data from Europe and the United States. The halt in the rally was despite some positive development reported on November 01 over US-China trade row that has jolted the world economy and reduced energy demand, as well.

In the November 01, 2019 trading session, Brent crude oil price ended 2.42% higher against the previous close at $61.69/bbl, driven by stellar US Jobs data, as the United States job growth softened less than forecast in October and hiring in the prior two months remained stronger than previously estimated, also  post two prevalent world economies had made progress on trade talks and officials from the United States stated that a deal could be signed between the two nations by the end November.

However, the rally was little generous in the wake of challenging macro-condition and softening demand for crude across the world. Also, the production cut by Organisation of Petroleum Export Countries (OPEC), Russia and other producers collectively known as OPEC+ has reduced oil production to 1.2m barrels per day since January 2019, which is also propping up oil prices.

Also, the two facilities owned by Saudi Aramco were recently attacked using drones, and the attack was claimed by Houthi rebels from Yemen, an Iran-supported outfit. The attack cut more than half of the production of Saudi Arabia and shut 5 per cent of global crude output, as the biggest crude oil processing plant in the world was damaged. However, the rally did not sustain very long as Saudi recovered its full oil production capacity within a month time.

On November 04, 2019, the United Kingdom and the United States are due to report their manufacturing data, with more United States and Chinese macro data set to come later this week. The UK is set to report its Construction PMI and BRC Retail Sales Monitor later in the day, the UK’s October Construction PMI was reported 42.8%, reflecting sharp contraction and BRC Retail Sales Monitor for October 2019, slumped by 1.7% on a YoY basis. And, the United States too is set to report its Factory Order (MoM) which had slumped 0.1% in September 2019 and Total Vehicle Sales, as well on November 04.

On November 07, 2019, Major Asian Economy, China is set to report its Exports data which had (YoY) slumped 3.2% previously, import data (YoY), declined 8.5% earlier and Trade Balance which stood at the US $39.65bn last time. Also, later this week, China too will release it’s CPI (YoY), CPI (MoM) and PPI (YoY).

Meanwhile, the United States President Donald Trump commented on November 01, evening that talks related to “Phase 01” deal was moving well, however, there is scepticism over whether a complete trade agreement will be attained.

Leader of both the world’s large economies were likely to sign the partial arrangement at the Asia Pacific Economic Cooperation summit in Santiago, Chile scheduled to be held between November 16 to November 17, but it has been put into dilemma as on Wednesday (October 30, 2019), Chile withdrew as host of the meeting.

Also, the Organisation of Petroleum Export Countries (OPEC) will launch the World Oil Outlook (WOO) on November 05, 2019, at Vienna. HE Mohammad Sanusi Barkindo, OPEC's Secretary-General, would report the key findings of the WOO 2019, along a video message has been scheduled with a vital message to support this year's publication.

WOO, when first was published in 2007, gave a detailed analysis of the oil and energy industries and provided a complete assessment of several sensitives of the development of the oil industry in the medium and long-term. The OPEC’s World Oil Outlook also offers understandings into upstream and downstream, demand and supply, investments, the possible effect of policies and justifiable developments.

OPEC's Secretary-General said that WOO is an exclusive, valuable and edifying reference instrument that allows OPEC countries to share their opinions and analysis. That could be then utilised to initiate debate and encourage knowledge-sharing to drive further research in the coming years.

Meanwhile, World’s most profitable company and Saudi Arabia's giant oil-producing company Saudi Aramco finally got a green signal for its initial public offering (IPO) on Sunday (November 03), but released very few information related to a number of shares which will be issued, pricing and date for a launch, as well. The group also recorded that as of now there are no current plans for a foreign listing of its shares

Oil Price Performance – (YoY)

International Oil benchmark Brent Oil has so far declined more than 15% on a YoY basis but added approximately 15% on a YTD basis and reduced marginally in the past three months. At the time of writing (as on November 04, 2019 at 08:23 AM GMT), Brent Oil – January 20 futures traded 0.28% lower at $61.52/bbl and registered an intraday high of $61.66 and a low of $61.28, respectively. In the year-over period, it has registered a 52w high of $75.6/bbl and a 52w low of $49.93, respectively. At the current level, it was quoted approximately 18.6% off 52w high and 23.19% above its recorded 52w low price level, respectively.

On the other side US Crude Oil benchmark WTI Crude Oil traded 0.25% lower at $56.05/bbl at the time of writing. It has touched an intraday high of $56.41/bbl and a low of $55.84/bbl, respectively. In the past 52-weeks, it has registered a high of $66.6/bbl and a low of $42.36, respectively. On a YoY basis, WTI Oil Futures contracted 11.43%.