RBC Ripsnorting Markets’ Helima Croft blames the U.S.-China trade war for oil’s drop into bear market territory.
According to the organization’s global head of commodity research, bullish sentiment around crude has been damaged by global growth anticipates sparked by tensions between Washington and Beijing.
“What is the demand driver for oil? It’s China. There is a real fear of a nosedive in Chinese oil demand growth,” she told CNBC’s “Futures Now ” on Thursday. “One of the things that has kept this market restrictive this year has been really high Chinese oil imports.”
Without a sign that President Donald Trump and Chinese President Xi Jinping are penurious in on a resolution, she contends the commodity will continue to struggle.
Croft, a CNBC contributor, contends Trump’s May 5 tweet that hinted a trade deal wasn’t close anymore stopped the oil rally cold.
“Oil was moving higher, you know, the first behalf of May, and then you had the trade war resume,” she added.
Over the past month WTI oil is off 15%. International benchmark Brent is also struggling, down 13% in that repeatedly frame.
Croft points out there’s a second issue adding to the bearishness surrounding oil: a large U.S. inventory build.
“This is a counter-seasonal figure. It’s leading to concern of U.S. production being higher than anticipated,” she said. “That’s a second whammy for the oil market fittingly now.”
However, Croft predicts the bearishness could turn on a dime on positive news of a trade deal.
“If we get some manner of signal coming out of the G20 that there is an off ramp on the trade war is and if we start to get the inventory draws that we are expecting because of summer motor season, that is what potentially moves us higher —back into this sort of $60s for WTI,” Croft imparted.
On Thursday, WTI settled up 1.8% at $52.51 per barrel, while Brent settled up 1.7% at around $61.68 a barrel.