After months of persistent concerns that global economy will suffer from a heated U.S.-China trade war, leading to lower oil demand growth in the world, renewed hopes that an agreement could be reached instilled optimism in market participants last week.
Oil prices rallied on Friday to their highest in three months and the highest so far this year, with Brent Crude reaching $65 a barrel and WTI Crude exceeding $55 per barrel.
A possible deal between the two biggest economies in the world would drive higher economic activity and could lead to higher energy demand and energy prices, Phil Flynn, senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor, writes.
Higher energy prices will lead to higher gasoline prices in the U.S., but slightly higher prices at the pump mean that the economy and people prosper and the economic prospects are brighter, Flynn argues, noting that we shouldn’t root for a no-deal in the U.S.-China trade talks.
“A higher price of gasoline may reflect a booming U.S. and global economy,” said Flynn.
Last week, oil prices were supported by hopes that a breakthrough in the trade talks could be reached, by larger-than-expected Saudi oil production cuts as part of the OPEC+ deal, and by restricted oil supply from Iran and Venezuela, due to the U.S. sanctions.
While supply constraints are set to push oil prices higher, the ultimate driver of oil prices will be demand, Flynn said.
A U.S.-China trade deal could ease worries about economic slowdown and raise global trade and economic activity, thus lifting energy and oil demand.
Early this week in Asian trade, crude oil futures and equities firmed up, driven by optimism that a U.S-China trade deal could be reached.
