The oil market continues to remain gloomy leading to low crude oil price. Concerns of demand crunch due to the fear of economic slowdown in lieu of the ongoing trade war supplemented by futile negotiations between the US and China last month is a primary concern for oil exporters. Additionally, the oversupply of oil in the global market has caused the price to be on the lower end. Crude oil currently costs around USD 64.131 per barrel (June 21) down from USD 71.32 [SP1] last month.
Despite of the growing tensions in the Middle East with Iran threatening to commence uranium enrichment beyond the approved level as per the 2015 Nuclear Agreement, the oil market has not budged much. Furthermore, attacks on 2 oil tankers in the Gulf of Oman and downing of the US military surveillance drone over the Strait of Hormuz by Iran has only revived the oil price marginally.
The upcoming G20 Summit in Osaka, Japan next week and the OPEC+ meeting are the major events that would be decisive in how the prices of crude oil will fare. As the leaders of the world’s top 20 economies congregate in Osaka, the prime issue on the table would be the trade war brewing between China and the US. The Presidents of China and the US have agreed to meet on the pretext of G20 and hold trade talks. The teams of both countries would begin discussions prior to the meeting of the two leaders. Although there seems to be a feeble chance to reach a positive outcome from the trade talks in such a short period, should a deal be reached, the oil market would likely bounce back.
Additionally, OPEC and its allied members would closely follow the G20 meeting and their decision to extend production cut or boost production and supply would probably be influenced by it. Although Iran and Venezuela’s production and supply are hit by the U.S. sanctions, considering the current oil glut and resulting unfavorable price, OPEC+ is likely to extend the production cut.
- “Bloomberg Energy”. Bloomberg. June 21, 2019. https://www.bloomberg.com/energy