Oil, Stocks Hang In Balance Ahead Of G20 Meeting

The oil market stabilized Monday following a 6 percent sell-off Friday ahead of this week’s G20 meeting. Saudi Arabia is reportedly producing record levels of crude oil in the month of November, and U.S. President Donald Trump has urged the Saudis not to cut production at the OPEC meeting next week.

Oil Giants Meet

Trump, Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman, the three most influential players in the global oil market, will all be attending the G20 summit this week and will likely discuss a strategy for the oil market ahead of the OPEC meeting, according to experts.

Trump has been criticized in the U.S. media for his support for Saudi Arabia and the Crown Prince after the U.S. CIA concluded bin Salman ordered the murder of journalist Jamal Khashoggi.

The market seems to believe Trump will be able to leverage his support for bin Salman into an agreement for OPEC not to cut production, which could further pressure oil prices.

"We want low oil prices, and Saudi Arabia’s really done a good job," Trump recently said.

Trade War

The G20 meeting could also have a major impact on global oil demand as well. Trump has scheduled a meeting with Chinese President Xi Jinping this week ahead of the potential implementation of a 25-percent import tariff on Chinese goods set to begin Jan. 1. Trump has also threatened to tack on duties on an additional $267 billion in Chinese exports if a trade deal is not reached.

Fears over the trade war and its impact on the Chinese economy have weighed on Chinese stocks in 2018. China is the world’s third largest oil consumer.

Market Implications

Cowen analyst John Kurnan said the implications of the G20 on the ongoing trade war have even overshadowed the holiday shopping season for U.S. retail stocks.

“We suspect tariff and supply chain issues could create uncertainty over initial guidance for 2019 across the entire sector, which is likely to limit near-term valuation multiple expansion and create volatility,” Kurnan wrote in a note.

The SPDR S&P Retail XRT is down 3 percent in the past month. The United States Oil Fund LP USO is down 23.1 percent in that time.

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