Oil price reflects the pulse of geopolitics

Rising oil prices reflect falling US inventories and optimism in negotiations between Trump and Xi Jinping

Driven by a sharp drawdown in crude oil and fuel inventories in the United States — a sign of buoyant demand — and President Donald Trump’s optimistic tone on trade negotiations with Chinese leader Xi Jinping. The move brought temporary relief to investors after days of instability in the global energy market.

According to data released by US Energy Information Administration (EIA)crude oil inventories fell almost 7 million barrels last week, a retraction much higher than the forecast of analysts, who expected only 211 mil barris. The surprise in the numbers caused traders and analysts to review their projections for the sector, which had been under pressure due to fears of a possible excess supply.

With the release of the data, the Brent oil had an appreciation of 52 cents (0.81%)reaching US$64.92 per barrel. Already the West Texas Intermediate (WTI)a North American reference, rose 33 cents (0.55%)being negotiated at US$ 60,48. O Mexican export mix also recorded a slight increase in 0,05%reaching US$57.56 per barrelan advance of three cents.

The rise marked a interruption following three falling sessions and was seen as a sign of recovery of confidence in the market. Analysts highlight that the combination of the reduction in inventories and positive expectations surrounding the global economy helped boost investor sentiment.

“Where is the excess supply?” he asked. Phil Flynnanalyst at Price Futures Groupwhen commenting on the EIA report. “The longer it takes for this excess to appear, the more we will doubt its existence,” he added, suggesting that the balance between supply and demand may be more adjusted than previously imagined.

To Giovanni Staunovoanalyst at UBSthe numbers reinforce the perception that there is a strong implicit demand for oilwhich should support prices in the short term. “Combined with the fall in stocks, the EIA report was very positive for the market”, he assessed.

The scenario gained even more optimism after statements from Donald Trumpwho demonstrated confidence in a favorable outcome in talks with the Chinese president Xi Jinpingscheduled for this Thursday during a summit in South Korea. According to Trump, the negotiations could unlock significant advances in trade relations between the world’s two largest economies — a factor that tends to directly impact the pace of global economic activity and, consequently, the demand for energy.

During the same international meeting, United States and South Korea completed the details of a complex trade agreementreinforcing the climate of economic cooperation in the Asian region.

The set of factors — lower oil supply, global growth expectations and ongoing diplomatic agreements — revived investor sentiment and brought a breath of fresh air to the energy market, which had been pressured by concerns about OPEC+ production and record pumping in the United States.

Amidst the sector’s characteristic volatility, Wednesday was marked by a truce and a clear message: the oil market, although sensitive to geopolitical tensions, remains attentive to every sign of balance between production and consumption.