Brent gains over trade talks optimism

The front-month ICE Brent contract has gained by $0.33/bbl on the day, to trade at $69.40/bbl at 09.00 GMT.

IMAGE: Oil storage tanks. Getty Images

Upward pressure:

Brent crude’s price has gained amid market optimism over trade talks between the US and the European Union (EU), following closely on the heels of a recent US-Japan deal.

Both trade partners are expected to come to an agreement that could boost trade and support demand growth for commodities like oil, analysts say. “The main upward impetus [to oil] was coming from market optimism that the US and the European Union are closing in on a trade deal,” said VANDA Insights’ founder Vandana Hari.

Earlier this week, the US and Japan reached a deal under which Japan’s auto sector will face a reduced tariff of 15%, down from the previously imposed 27.5%.

“The US says it has managed to conclude several trade-deals this week, including with Japan and the Philippines,” two analysts from ING Bank noted.

Duties on Japanese goods that were scheduled to come into effect from 1 August will also be lowered to 15% from 25%.

“These deals should help reduce uncertainty and also ease some of the demand concerns that have been lingering in the oil market,” ING analysts added.

Downward pressure:

The US administration has reportedly allowed US oil company Chevron to resume operations in Venezuela. This news has put some downward pressure on Brent today.

Washington is preparing to announce new authorisations to Chevron’s key-oil partner - Venezuela’s state-run oil company PDVSA, Reuters reported, citing five sources.

Earlier this year, US President Donald Trump had revoked a license given to Chevron to operate in Venezuela. The new authorisation will allow both companies to resume joint operations and conduct oil-for-debt swaps in the sanctioned OPEC country.

“This reversal coincides with the release of some Americans detained in the South American country,” ING Bank analysts said.

If approved, this move could see Venezuelan oil exports rise by about 200,000 b/d, the analysts remarked. “Welcome news to US refiners that will ease some tightness in the heavier crude market,” they added.

By Aparupa Mazumder

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