Energy Markets Continue to Be Threatened by Trade War
- Crude oil falls
- Natural gas gets hammered
- Trade tensions remain
The energy sector has been hammered to start off the week on Monday, as we continue to see a lot of noise around the US-China trade talks. During the previous week, there were a lot of hopes pinned on the idea that, perhaps, the Americans would pull back on some of the tariffs that were coming down the road, in response to signing “Phase 1” of the trade deal.
However, since then it has been reported by none other than Donald Trump himself that he has not made that decision, and that the Chinese are “dragging their feet”. This is a bad sign when it comes to the trade war getting resolved, as it looks like there has been a lot less headway made in this scenario than hoped.
West Texas Intermediate Crude Oil
The West Texas Intermediate Crude Oil markets have been down over 1% early during Monday trading, as the flare-up in trade tensions has traders worried about the idea of demand for crude oil.
There are a whole host of reasons that could drive down the price of oil, as the lack of demand coming from the transportation of goods is one of the major issues. Beyond that, some other problems will be with the potential of employment sliding, and therefore less crude oil being used for personal transportation as well.
Overall though, the price has been consolidating. So while we have seen a decent slide during the session, it isn’t necessarily the beginning of some major meltdown.
Natural gas markets have been completely hammered during the session on Monday as well, But unlike the WTI Crude Oil market, the natural gas markets lost 4%. This is a huge move, as natural gas markets continue to be very volatile.
That being said, natural gas will have a bit of a barrier to overall selling for a couple of different reasons. These include the fact that it is at a very historically low level, and colder temperatures in the northeastern part of the United States will drive up demand for heating.
As far as the industrial use for natural gas is concerned, the idea of power being needed during a messy trade war is a bit of a stretch. All things being equal, this is more likely to find a bit of a push in demand than other energy, regardless of the trade war.
Eventually, temperatures will plunge enough to empty out supply. This is a cyclical trade that does quite well, until about the middle of January.