Brent Crude Crosses $100 to Start the Week
President Trump responded to Iran's counterproposal to end the conflict, stating it was “totally unacceptable.” His response leaves open the risk of an official re-escalation of tensions between the two nations, prolonging the current energy disruption around the world.
The key sticking points continue to revolve on three things:
1. Iran's ability to retain its nuclear production facilities,
2. Iran’s desire to maintain some control over the Strait of Hormuz, and
3. The halting of hostilities in Lebanon and Gaza.
One of the bigger wildcards this week is the meeting between President Donald Trump and President Xi Jinping of China. Issues expected to be discussed range from the Iran war to Taiwan and agricultural purchases. But the biggest item that may emerge from this event is an energy deal between the two countries — specifically, an effort to get China to purchase U.S. oil and liquefied natural gas.
Although the possibility of a finalized energy deal during this visit may be a long shot, any sense of optimism around a deal of this nature could spark another bullish run for WTI and oil-related equities in the United States.
Energy traders have been on watch throughout the past week as WTI crude traded within an approximately $20 range. India's Prime Minister Narendra Modi h is advocating for COVID-19-style work-from-home policies and reductions in unnecessary travel, among other measures to curb energy demand and preserving energy stockpiles. As more countries adopt such restrictive policies, the daily disruption of energy flows are likely to slightly dampen demand-side dynamics in the near term, which could take some pressure off energy prices for several weeks.
However, this also comes at the cost of slowing economic growth for many oil-dependent nations — particularly emerging market economies that rely heavily on global industrial consumption to drive exports of raw materials and intermediate goods.
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