U.S.-CHINA TRADE DEAL BOOSTS ENERGY MARKET

February 25, 2020

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For the first time this year, oil prices are on an upward trend, partly due to the boost from the U.S.-China Phase One trade deal. This will involve an increase of more than double, a massive $50 billion, in China’s purchasing of American oil and gas in 2020. The primary achievement of the deal has been both parties agreeing to cancel their upcoming tariff hikes, which was initially tempering on uncertainty.

“The preliminary U.S.-China trade agreement, to be finalised next month, continues to support crude and refined product prices as it removes the risk of new trade barriers between the world’s two largest economies,” said Robbie Fraser of Schneider Electric. “As the United States has recently become a net exporter of crude oil and refined products, access to the Chinese market is critical for its crude and LNG exports,” he added.

South Korea also adds a significant boost to the US oil market. In 2019, purchasing from South Korea more than doubled by November to 142 million barrels (EIA), placing the country as the second highest buyer of US crude oil, just 10 million barrels behind Canada. As exports increase and the demand for US crude oil grows in the Asian market, we predict more projects and jobs will follow.

Peaceful trading relationships between the US and Asia will certainly help to increase the demand of oil in the future. However, Eugen Weinberg of Commerzbank said the recent rise in price was mainly due to the decision by OPEC and its partners to further restrict production.

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By Nicolas Boudou