Oil Still, Trade War Still Looms

24 April, 2018

Soteris Phoraris

Trump’s trade war will most definitely have collateral damage and U.S. based fund managers believe it will be higher inflation. Analysts are also saying higher cost of raw materials will be conveyed to the consumer.

At a larger scope though, they estimate it will shave 0.7% off the GDP, pushing inflation upwards – all these factors will likely impact the value of USD and U.S. stocks negatively. If the targeted countries respond with their own tariffs, then U.S. stock may even take a 10 percent hit according to these same estimates.

While markets wait for the drums of a trade war to intensify, oil seems stable The U.S. has once again increased its rig count which solidly points towards a bolstering of global supply by U.S. produced shale. This is just days after the world leading oil producer said they want crude prices to reach $80 - $100 a barrel – pointing towards the OPEC supply restrictions continuing. Russia the + in OPEC+ though produces even more oil than the States at 11 million barrels per day so some members may be exempt or enjoy leniencies.

Policy is also affecting oil prices – the U.S. currently has sanctions against three oil production power-players: Iran, Russia and Venezuela. Russian sanctions are a result of the conflict in Syria, the latest sanctions on Iran were imposed due to their ballistic missile program, the previous sanctions were due to their nuclear program. The official State Department reasoning for the Iran sanctions cite “engaging in support of illicit Iranian actors or transnational criminal activity.” Sanctions against Venezuela are due to corruption when a government official was accused of being involved in a food smuggling scheme.

These sanctions put further pressure on oil, and they aren’t even close to being resolved. In turn this means that pressure on the energy commodity isn’t going away either.

Another noteworthy event taking place today is the Macron – Trump three-day meeting starting today. Macron was one of the first NATO allies to respond to Trump’s call to arms when an alleged chemical attack took place in Douma, Syria by Assad forces. This ultimately led to the sanctions against Russia – which back the Assad regime.

Something that makes the meeting even more interesting is the fact that the two politicians’ agendas seem to be in complete contradiction to eachother. Macron is a globalist, liberal and wants to curtail global warming. Trump questions whether global warming is a valid environmental threat, believes in (at least) nationalist economic exclusionism and was voted into the position by right-wing populism.   

Why is this meeting important? Because it could signify the continuation of the joint strike against the Assad forces in Syria, further destabilizing the region, putting more pressure on the price of oil.

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