Market Overview

G20 Developments Send Oil Prices Soaring

G20 Developments Send Oil Prices Soaring

Oil prices surged Monday after a November in which prices fell more than 20 percent. The new wave of optimism in the oil market stems from some major headlines from the G20 summit over the weekend.

Trade Truce

The biggest headline for the global oil market may have had nothing to do with OPEC. The U.S. and China reportedly agreed to a 90-day truce in their ongoing trade war as negotiations continue on a trade deal.

China’s economy appears safe at the moment from U.S. President Donald Trump raising tariffs on more than $200 billion in Chinese goods from 10 percent to 25 percent. Prior to the truce, Trump said he would raise tariff rates to 25 percent starting Jan. 1. 

China is the world’s third-largest oil consumer, and the health of its economy has a major impact on global oil demand.

Production Deal

Oil investors got some good news on the supply front as well. According to Russian President Vladimir Putin, Russia and Saudi Arabia agreed to extend their deal to curb oil production ahead of the planned OPEC meeting this week. Although Putin said no final agreement was reached related to specific volume cuts, it appears that for now Russia and OPEC will maintain their production discipline to keep the global market stabilized.

One final piece of oil-related news out of the G20 this weekend was Qatar’s decision to withdraw from OPEC after more than 50 years of membership. While Qatar’s withdrawal means it will not be beholden to an OPEC production cut deal, Qatar is one of OPEC’s smallest producers and will likely not have a major impact on the global market.

Tigress Skeptical

While oil investors cheered the news out of G20 on Monday, Tigress Financial analyst Ivan Feinseth said he's skeptical of the impact the deal between the Saudis and Russia will have in the long run. 

“I believe oil will continue to decline, as the supply that drove downside momentum will take a while to gain any balance, even if Saudi Arabia is successful in pushing a production rate cut through,” Feinseth said.

“The one thing to remember about OPEC is that Russia is not a member and does what it wants and all the other members cheat anyway.”

The United States Oil Fund LP (NYSE: USO) opened Monday’s session up 4.7 percent.

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