Oil prices are back below their level at the OPEC + meeting. Brent Crude and WTI are currently trading at 58.66 and 49.09 respectively, approaching 58.10 and 48.50 short-term. Dropping by more than 30% since their early October 2018 high, they are still headed down, despite the effort from OPEC + to reduce supply by 1.2 million barrels per day. Worries of a deceleration in global economic growth should weigh on the demand, as the US, recently named the largest oil producer worldwide, is ramping up its production by 8 million bpd by year-end. This means OPEC + production will have to be reduced further to convince investors of a supply shortage. However, recovery potential is not to be neglected. US-China resolution of trade policies is advancing. Crude prices are expected to drop further short-term, as a recent speech from China’s President Xi Jinping made no specific mention of reforms. This week’s Central Economic Work Conference in China should provide more details, which should comfort investors that Chinese authorities are willing to implement tax reforms.
By Vincent Mivelaz