Market Awaits US-China Trade Outcome

After moving higher in early morning trading, oil prices are back down once again, hovering just above $50 threshold after a brief stint into the $49 range this morning. Currently WTI crude is trading at $51.19, down 26 cents since yesterday.

Fuel prices are trading relatively flat this today, with diesel pushing new lows thanks to the surprise stock build reported on Wednesday. This morning, diesel prices are trading at $1.8453, up 0.2 cents since Thursday’s close. Gasoline prices are at $1.4412, down 1.4 cents but still a few pennies above this week’s lowest points.

Russia has been flip flopping in their market chatter lately. Yesterday markets jumped higher when Russian oil companies and the Energy Ministry indicated Russia agreed with OPEC that a production cut was needed – a change from earlier statements that oil prices were at comfortable levels. Today, Russia has gone back on their statement. Energy Ministry Novak said Russian production will remain at current levels through the end of the year, and that they are happy with international prices around $60 ($50 for WTI crude).

Markets are anxiously looking ahead to the G20 meeting starting today in Buenos Aires, Argentina. The most important agenda item is US-China talks on the sidelines of the meeting, which will cover trade policy. Trump indicated earlier this month that both countries are nearing a resolution in trade talks, but markets are more skeptical. Three outcomes are possible:

1. Trade War Resolution – If a resolution to the trade war is struck and tariffs are lifted, expect a strong stock market rally and accompanying oil price bump. This is the least likely outcome to the meeting.
2. Continued Escalation –The two countries could exit with absolutely no progress, promising even further tariffs in the future. If Trump and Xi fail to make any progress and tariffs continue, expect the stock market to take a bit of a hit, and oil prices could fall even lower.
3. Vague Trade Statement – Most likely this week is a vague, largely meaningless statement supporting trade between the two countries but not committing to any action. Presumably tariffs would remain in place, but further tariffs would not be imposed for now. This outcome would likely be neutral or slightly positive for markets.