It looks like the higher gas prices are going to stick around a little longer as tightening global supply and expected higher US demand have offset trade tensions incited by a US tendency towards increasing Chinese tariffs.
US West Texas Intermediate crude futures managed to settle a little, 4 cents down to $61.66, at the end of the week, after hitting $62.49. WTI is down only about one-half percent on the week. On the other hand, Brent crude was up nearly a quarter, to $70.62 per barrel after peaking at $71.23. Brent is also slightly down for the week.
Many are chalking up the weekly losses to a volatile week as investors express continued concern over a prolonged—and, let’s be honest, bitter—US-China trade war. Unable to strike a deal, the US government escalated its tariff war, on Friday with a 25 percent in levies on $200 billion worth of Chinese goods. While negotiations were set to continue on Friday, President Donald Trump argues that China broke their promises and, as such, he is in no rush to close this deal.
Now, it is important to note that the United States and China, combined, account for 34 percent of global oil consumption, in the first quarter of 2019, alone. That means ay change to the relationship between these two—as the largest oil consumers in the world—will definitely affect oil demand in one way or another.
Still, investors are moving their focus away from these trade issues to instead look at the impact of sanctions on Iran and the consistent conflicts in Libya, all of which threaten oil supplies. In addition, investors are now focused on not only US sanctions on Venezuela and Iran as well as the tightened supplies after OPEC made their production cuts. The market also seems to believe that OPEC will reach out with an output-cut agreement at some time in the next two weeks.
Of course, we are nearing the summer driving season and, so far, the Russians and the Saudis do not appear to plan on raising production. Since Iran sanctions are also still in place, these factors definitely support the price of crude right now.