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Oil Steadies With Focus Shifting From Trade to Sanctions Impact - BLOOMBERG
(Bloomberg) -- Oil swung between gains and losses on the back of the biggest weekly increase since June as traders weighed progress between the US and China on trade, and the wider outlook for supply.
West Texas Intermediate was little changed after adding nearly 7% last week. Top Chinese and US negotiators said they came to terms on a range of points, setting the table for President Donald Trump and counterpart Xi Jinping to finalize a deal to ease trade tensions between the world’s two biggest economies and crude importers.
Still, the supply outlook remains uncertain. The US last week sanctioned Russian oil giants Rosneft and Lukoil to squeeze Russia over its ongoing war in Ukraine, adding output risks to a market that’s showing signs of entering a surplus.
The Trump administration is seeking to make Russia’s trade harder, costlier and riskier, but without forcing a sudden supply shock that might spike global oil prices, officials familiar with the matter said over the weekend.
The measures helped oil rebound from a five-month low last week, but part of the move was likely driven by extreme market positioning. Traders had amassed record bearish wagers on the global Brent benchmark in anticipation of oversupply in the next few months. In the meantime, commodity trading advisers, or CTAs, are set to accelerate upward momentum in prices, according to Daniel Ghali, a commodity strategist at TD Securities.
“We ultimately expect minimal disruptions from the recent wave of sanctions, but in the imminent-term quant fund shorts will drive price action over the coming sessions,” Ghali said.
Still, with the OPEC+ alliance continuing to add barrels, and some members including Kuwait suggesting there could be further increments, the concerns about a glut remain.
Oil prices are likely to moderate as a result of ample supply over the coming days and weeks, the International Energy Agency said Monday. The market will be in surplus as output from the Americas helps outpace the growth in demand this year, IEA Executive Director Fatih Birol said.
--With assistance from John Deane.
