With the meeting between Trump and Xi now concluded in Busan, South Korea, energy markets are reacting to confirmation that a U.S.-China trade deal has been reached, easing some of the uncertainty that had been weighing on sentiment in recent weeks. The meeting lasted one hour and forty minutes and, according to President Trump, resulted in a one-year trade pact that will be routinely extended.
Trump said tariffs on Chinese goods will be reduced to 47% from 57%, and confirmed that the rare earths issue has been settled. He also announced plans to visit China in April, with Xi Jinping expected to visit the U.S. sometime thereafter, describing the talks as “amazing” and noting that “a lot of decisions were made.”
At the time of writing, oil prices were trending lower, with WTI falling 0.48% to $60.19 while Brent dropped 0.40% to $64.66. A surprisingly large draw in U.S. inventory data on Wednesday had given oil prices some upward momentum, but attention has now shifted to the implications of the new trade agreement.
A thaw in U.S.-China relations could further boost oil prices, easing fears of a global slowdown in economic growth. Markets had already begun to price in a successful outcome ahead of the meeting following reports of a “trade framework” between the two superpowers. With a deal now reportedly confirmed, the focus will turn to implementation and whether the accord can deliver lasting stability after years of tariff-driven volatility.
If the two countries fail to come to an agreement, as happened back in June when Trump claimed a deal had been done but failed to produce anything tangible, then downward pressure will build once again on oil prices.
Oil markets will remain on edge as we await more details.
By Charles Kennedy for Oilprice.com