Optimism among oil traders is rising despite mixed signals from the world’s top oil consumers, largely thanks to signs that pressure is easing between Washington and Beijing and the latter’s record-breaking oil imports.
Brent crude and West Texas Intermediate have both been on a more or less steady rise for about four weeks now. During that period, OPEC+ agreed to deepen its production cuts by half a million bpd, China continued importing crude at record-breaking rates, and U.S. industrial production rebounded in November.
China’s record-breaking crude oil imports hitting 11.8 million barrels a day (mbd) in November are the clearest indication that China’s economy is sturdy and that the fundamentals of the global oil market are positive and are being enhanced by the de-escalation of the trade war.
However, the oil market should be wary of President Trump’s tendency to change his mind suddenly vis-a-vis the start of a reconciliation with China particularly in the aftermath of his impeachment. Still, China’s roaring oil imports could sustain the momentum of the oil price’s surge.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London