Market Report & Analysis for 1/23/2019 Morning Edition
Morning Market Overview
New York Mercantile Exchange oil futures nearest delivery and Brent crude on the Intercontinental Exchange rallied Friday ahead of the three-day holiday weekend and advanced on the week, with West Texas Intermediate, Brent and ULSD futures settling at two-months highs on their spot continuation charts and RBOB futures at a five-week high, as the outlook for oil demand growth brightened and Saudi Arabia sharply cuts output.
News reports this week showed ongoing progress in trade negotiations between the United States and China that have firmed sentiment the two economic superpowers would reach an agreement settling their trade dispute. In the latest development, news reports indicate China would spend heavily on U.S. imports over the next six years to bring its trade balance with the United States to zero, which equates to a $1 trillion buying spree for U.S. goods.
This news followed a Wall Street Journal report late Thursday that U.S. Treasury Secretary Steven Mnuchin during a strategy meeting contemplated removing some or all the tariffs on Chinese imports as a way to incentivize deeper concessions by China. The United States and China are negotiating during a 90-day truce in their trade dispute that expires March 1, with the United States set to hike tariffs on $200 billion worth of Chinese imports from 10% to 25% on March 2 if the two sides fail to reach an agreement. Tariffs lobbed at one another for nearly 10 months has slowed world trade and China’s economy, prompting Beijing this week to announce 1.3 trillion yuan in stimulus to boost its economy. Investors feared an escalation in their trade dispute could steer the world economy into recession.
Oil futures were also lent support from below normal temperatures across large swathes of the United States, with colder-than-usual weather for the eastern half of the United States forecast through Feb. 15 by the National Weather Service’s Climate Prediction Center.
As the cold weather forecast, along with the three-day break in trading, sparked short covering, a move above the 50-day moving averages by all the contracts triggered fresh buying.
