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Oil Slips as Investors Await Clarity on U.S.-China Trade Talks

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These translations are done via Google Translate

By Saket Sundria and Grant Smith

(Bloomberg) Oil eased from the highest close in eight weeks as traders awaited clearer signs on whether the U.S. and China can reach a trade deal, and relieve pressure on the world economy.Futures slipped 0.9% after closing at the highest level since Sept. 23 on Friday. American and Chinese trade negotiators held “constructive discussions” in a phone call on Saturday to address each side’s core concerns surrounding a phase-one deal. Saudi Aramco set a valuation target for its initial public offering well below Crown Prince Mohammed bin Salman’s goal of $2 trillion and pared back the size of the sale after the government decided to make the deal an almost exclusively Saudi affair.

Progress in trade talks hold oil prices near two-month high

“At this stage we do not know how successful the negotiations of the ‘phase one’ will be,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London. “For the time being, risky assets look encouraging more on perceptions than facts. The global oil supply-demand balance needs to tighten.”

Crude has increased since early October and short-sellers slashed their bearish positions on West Texas Intermediate by 41% in the week ended Nov. 12 on prospects for a truce in the trade war. Still, the International Energy Agency predicts the market is likely to remain “calm” next year as soaring production outside OPEC and high inventories keep consumers comfortably supplied.

WTI for December delivery fell 52 cents to $57.20 a barrel on the New York Mercantile Exchange as of 8:33 a.m. local time. The contract added 95 cents to close at $57.72 on Friday for a second weekly gain.

Brent for January settlement was 63 cents lower at $62.67 a barrel on the London-based ICE Futures Europe Exchange, after increasing $1.02 on Friday. The global benchmark crude traded at a $5.37 premium to WTI for the same month.

Sky Eye Measurement
Sky Eye Measurement

See also: Oil Traders Up All Night as Chinese Buyers Seek ‘Trigger’ Prices

The trade call was held at the request of U.S. negotiators, and the two sides agreed to remain in close communication, the Chinese Commerce Ministry said in a statement. They were close to concluding a pact about six months ago, only for America to claim that China backed away from verbal commitments when the time came to sign the deal.

Saudi Arabia will sell just 1.5% of Aramco’s shares and set a valuation target of $1.6 trillion to $1.71 trillion for its IPO. The energy giant canceled the London leg of its roadshow, scheduled for Wednesday, according to people familiar with the situation, after earlier deciding not to market the offering in the U.S., Canada or Japan. The deal will now mainly rely on rich Saudi families and other local investors.

Other oil market news
  • Iraq continues to pump and export crude normally despite deadly protests that have spread across much of the country, including the southern oil-industry hub of Basra, according to the Oil Ministry.
  • Iranian security forces detained hundreds protesting a sudden surge in fuel prices, signaling there would be little tolerance for unrest sweeping the sanctions-battered country.
  • The $146 billion lubricants industry is at risk of suffering the same fate as Kodak, thanks to the rise of electric vehicles.

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