WTI drops below $54 as investors assess US-China trade agreement
- Crude oil started the week under pressure following last week's rally.
- Saudi energy minister acknowledged that the oil market is not stable.
- Investors continue to asses the United States (US)-China trade deal.
Crude oil prices finished the previous week on a strong note boosted by the heightened expectations of the United States (US) and China reaching a partial trade deal. The barrel of West Texas Intermediate (WTI) added more than 4% in the last two days of the week but struggled to build on these gains on Monday.
Will global energy demand recover?
The lack of clarity on the first phase of the trade deal and its potential impact on the global oil demand outlook caused investors to take their profits off the table.
Commenting on the latest developments surrounding the trade dispute, "China committed to doubling its annual purchase of American agricultural products to as much as $50bn. The United States (US), in turn, held back from implementing tariff increases scheduled for this week. But there are still plenty of clouds on the horizon,” said Royal Bank of Scotland analysts. “All the existing tariffs remain in place and the threat of escalation remains (tariffs increases due on the 15 December would hit consumer goods) and the core issues of national security and technology transfer have yet to be thrashed out. Long way to go in this saga.”
Meanwhile, Saudi Arabia's energy minister on Monday said the oil market was not stable yet and added that there was still volatility. Although the minister said that they will extend their voluntary output cuts at approximately 400,000 barrels per day, crude oil struggled to stage a meaningful recovery. As of writing, the barrel of WTI was trading at $53.50, erasing 2.35% on a daily basis.
Technical levels to watch for