26.06.201912:18 Forex Analysis & Reviews: Is oil at $ 30 possible in the event of a new round of trade conflict?

According to experts from Bank of America Merrill Lynch, the cost of oil might fall to a critical $ 30, a barrel in the event of unsuccessful negotiations between China and the United States and the inability to find a compromise. In this situation, both powers will face a new round of trade conflict that will adversely affect the black gold in the global market.

According to experts from Bank of America Merrill Lynch, the cost of oil might fall to a critical $ 30, a barrel in the event of unsuccessful negotiations between China and the United States and the inability to find a compromise. In this situation, both powers will face a new round of trade conflict that will adversely affect the black gold in the global market.

Bank of America strategists Merrill Lynch believe that the imposition of export duties on goods worth $ 300 billion will force the Chinese authorities to devalue the yuan in order to maintain the competitiveness of local goods. If the administration of Donald Trump imposes duties on all products from China, the yuan will have to be devalued to 7.3 for 1 US dollar. At first glance, the fall seems insignificant, about 6% of the current level. However, the oil traded in dollars, much more expensive, experts say. This threatens to reduce demand in the global market for the largest consumers of oil, analysts give caution.

In the case of the implementation of the extreme scenario considered by the strategists of Bank of America Merrill Lynch, China is able to ignore US sanctions against Iran and begin purchasing black gold. Their volume can reach 2 million barrels per day or more. This situation will have a negative impact on the global oil market. As a result, the cost of black gold will be reduced by half, up to $ 30 per barrel. In this case, oil producers expect a collapse similar to the crisis of 2014, when oil prices plummeted by 45%.

However, Bank of America Merrill Lynch consider this unlikely. Bank experts generally adhere to a conservative forecast. He suggests that in the second half of 2019, the price of Brent crude oil will remain at $ 63 per barrel, while the price of light WTI oil will be $ 56 per barrel. During the last trading session, Brent oil quotes rose by 1.62%, closing at $ 65.83. Market participants reacted positively to recent data from the American Petroleum Institute (API), according to which weekly reserves of black gold in the United States declined by 7.55 million barrels.

According to analysts, on the way of further climbing the price of the Brent futures contract costs $ 66. Overcoming it, will open up new opportunities for black gold. At the same time, WTI crude oil quotations reacted positively to the API report, increasing by 2.16% to $ 59.09 a barrel.