Oil Steady Ahead of G-20 Talks

WASHINGTON, D.C. (DTN) -- Nearest delivered New York Mercantile Exchange oil futures and Brent on the Intercontinental Exchange moved mixed with an upside bias in early trade Friday, with ICE August Brent and the NYMEX July RBOB and ULSD contracts set to expire Friday afternoon, while markets await a pivotal meeting between U.S. President Donald Trump and Chinese Xi Jinping at the G-20 summit.

NYMEX August West Texas Intermediate edged slightly higher to $59.50 per barrel (bbl) at 9 a.m. ET, with ICE August Brent crude up about $0.15 at $66.70 bbl, trading at a nearly $1 bbl premium to the September contract.

NYMEX July RBOB futures were down 0.7 cents near $1.9395 gallon, a 3.25 cents premium to the August contract. NYMEX July ULSD futures were up 0.9 cents at $1.9615 gallon, with the August contract holding a 0.9 cents premium to the expiring contract.

The crude markets are trading at the upper end of this week's trade range early Friday, as discussions between leaders of the Group of 20 nations begin in Japan, with hope the outcome of the summit will clarify the direction of global trade in the coming months. The highly anticipated meeting between Trump and Xi remains front-and-center at the summit, as it can potentially resolve a months-long trade fight between the world's two largest economies.

"We hope that decisions to be taken will help shed some light" on the future of the oil market, said Russian energy minister on Friday when asked about an extension of a production agreement between the Organization of the Petroleum Exporting Countries, Russia, and nine other non-OPEC to be discussed early next week.

An escalation in trade hostilities between the United States and China at the G-20 would be bearish for oil prices, said Morgan Stanley on Friday. The world economy would lose speed if Trump imposes import tariffs on the $300 billion worth of Chinese goods currently not subject to levies. Investors are hoping for a repeat of Trump and Xi's December agreement to postpone new tariff hikes, while they negotiate a final trade agreement.

Market participants will also pay close attention to the meeting between Russia's President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman scheduled for Friday at the G-20 summit in hope the two countries reach common ground ahead of the OPEC meeting in Vienna.

In December, both leaders used the event to agree on extending their output agreement, also days before OPEC officials met ahead of agreeing to the current agreement. A statement from Putin after his meeting with the Saudi royal may give insight into his country's position on the potential rollover of 1.2 million barrels per day (bpd) in OPEC production cuts again.

The summit will be the last chance for Saudi Arabia and Russia to negotiate before the OPEC production cuts expire Sunday. OPEC will meet Monday in Vienna joined by non-OPEC producers on Tuesday.

Liubov Georges can be reached at liubov.georges@dtn.com

(BAS)