MARKET WATCH: Oil benchmarks drop on trade talk setback, supply concerns

Oil benchmarks on the New York and London markets fell by more than $1.00 Nov. 19, attributed to a setback in ongoing trade talks between the US and China and speculation over OPEC+ production cuts.

Ole Hansen, Saxo Bank head of commodity strategy, said the prospect for a “phase one” trade deal between the two countries “received a major setback yesterday after the US Senate passed the Hong Kong Human Rights and Democracy Act. The bill drew a rebuke from China and the standoff is likely to complicate discussions about a growth stabilizing trade deal.

“Crude oil already under pressure dropped further with Brent and WTI both breaking the uptrends from early October. Weakness was seen already before the Senate vote as the market was growing increasingly worried about the lack of concrete progress in US-China trade negotiations. With demand growth once again being questioned,” he said, “the real damage was inflicted by a report from Reuters which said that Russia was unlikely to agree to further production cuts.” Without additional cuts from OPEC+, Hansen said, the International Energy Agency forecast a 2020 production surplus of more than 1 million b/d.

Energy prices

The December contract for light, sweet crude oil on the New York Mercantile Exchange decreased $1.84 to settle at $55.21/bbl on Nov. 19. The contract for January delivery dropped $1.79 to settle at $55.35/bbl.

NYMEX natural gas for December dropped nearly 6¢ to $2.51/MMbtu on Nov. 19.

Ultralow-sulfur diesel for December declined nearly 5¢ to a rounded $1.86/gal. The NYMEX reformulated gasoline blendstock for December dropped almost 2¢ to $1.60/gal.

Brent crude for January delivery decreased $1.53 to $60.91/bbl while the February contract decreased $1.51 to settle at $60.02/bbl.

The gas oil contract for December fell $4.25 to $567.50/tonne on Nov. 19.

The average price for OPEC’s basket of crudes was $62.51/bbl on Nov. 19, down 93¢.