Oil prices fluctuated in trading on Tuesday after the White House trade adviser unexpectedly commented on China’s agreement.
The US-China trade agreement has ended, is what he said. Although these statements were withdrawn later, the markets were terrified.
Brent crude dropped seven cents, or 0.1 percent, to $43.1 a barrel.
WTI crude lost 14 cents, or 0.3 percent, to $40.59 a barrel.
Relations between the US and China have been at an all-time low since the outbreak of the coronavirus, which originated in Wuhan. Donald Trump and his government have repeatedly accused Beijing of not being transparent about the pandemic.
Oil prices fell sharply after Navarro, an assistant to the Doland Trump administration, declared that the trade deal with China was over and that coronavirus’ spread was China’s fault.
He later stated that he did not trust the Chinese government; his remarks were misunderstood but the trade agreement remained in force.
According to Edward Moya, senior market analyst at OANDA, Navarro’s remarks were unexpected, and energy traders are likely to be pessimistic about US-China relations.
Number of oil drilling rigs fell to a record low
Prices rose earlier in response to the economic reopening of some US states and countries worldwide after the quarantine. These reopenings indicate improved demand for fuel. In New York, the most dangerous hotspot for corona in the United States, the streets became jammed after 100 days of quarantine.
Tensions in the Middle East also supported oil prices to some extent.
In the supply sector, rising prices prompted some drilling producers to resume work. However, the number of active oil and gas rigs in the US and Canada dropped to record lows last week.
The number of US oil rigs dropped by ten last week, to 189, the lowest since June 2009. The number of gas rigs decreased by three to 75, the lowest level since 1987.
American Bank optimizes oil prices
Meanwhile, Merrill Lynch, an investing and wealth management division of Bank of America, raised its forecast for oil prices for 2020 and 2021. Because of the improved demand after the economic reopening, and the agreement to cut production by OPEC Plus, Bank of America Merrill Lynch now expects the average price of Brent oil to reach $43.70 in 2020. This is higher than the previous forecast of $37. Brent crude forecasts were at $50 and $55 a barrel in 2021 and 2022, respectively.
The bank predicts that the average price per barrel of West Texas Intermediate oil will reach $39.70 this year. This is higher than the previous forecast of $32. Analysts forecast the average US oil price index at $47 for 2021 and $50 for 2022.