logo
Oil prices hold gains ahead of US-China trade talks

Oil prices hold gains ahead of US-China trade talks

Business Times2 days ago

[BEIJING] Oil prices held on to last week's gains early on Monday (Jun 9) as investors waited for US-China trade talks to be held in London later in the day.
Brent crude futures were flat at US$66.47 a barrel at 0008 GMT. US West Texas Intermediate crude was trading up one cent at US$64.59.
The prospect of a US-China trade deal supported prices as three of Donald Trump's top aides were set to meet with counterparts in London on Monday for the first meeting of the US-China economic and trade consultation mechanism.
The announcement on Saturday followed a rare Thursday call between the two countries' top leaders, with both under pressure to dial down tensions as China's export controls on rare earths disrupt global supply chains. Oil prices posted their first weekly gain in three weeks on the news.
A US jobs report showing unemployment held steady in May appeared to increase the odds of a Federal Reserve interest rate cut, further supporting last week's gains. Inflation data from China on Monday morning will give a reading of domestic demand in the world's largest crude importer.
The economic data and the prospect of a trade deal that could support economic growth and increase demand for oil outweighed worries about increased Organization of the Petroleum Exporting Countries and its allies (Opec+) supply after the group announced another big output hike for July on May 31.
HSBC expects Opec+ to accelerate supply hikes in August and September, which are likely to raise downside risks to the bank's US$65 per barrel Brent forecast from the fourth quarter of 2025, according to a research note on Friday.
Capital Economics researchers said they believe this 'new faster pace of (Opec+) production rises is here to stay'. REUTERS

Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

Can the US-China agreement to restore trade truce ease long-standing tensions?
Can the US-China agreement to restore trade truce ease long-standing tensions?

CNA

time13 minutes ago

  • CNA

Can the US-China agreement to restore trade truce ease long-standing tensions?

Trade relations between the United States and China remain fluid, even as the world's two biggest economies have agreed on a framework aimed at reducing friction and reviving the flow of sensitive goods, said observers. Top officials from Washington and Beijing on Tuesday (Jun 10) agreed on the preliminary plan after two days of intense discussions in London. The framework builds upon the groundwork that the superpowers laid in Geneva last month to ease tariffs they had taken against each other's economies. But further details, including plans for a next round of talks, remain sparse. 'It's important to realise that this remains a very fluid, a very contentious relationship,' said Alex Capri, a senior lecturer at the National University of Singapore Business School. 'In the past, historically, negotiating a proper free trade agreement literally took years because there are so many moving parts. There are so many elements … and that takes a lot of time.' Capri expressed skepticism about the efficacy of short-term negotiations, saying these might not lead to long-lasting agreements. 'I think we'll continue to see more transactionalism, and we'll probably see more and more of these types of shorter, one-on-one type of meetings that remain a work in progress,' he told CNA's Asia First. But observers said they are cautiously optimistic about the positive shift in tone between the two global superpowers. 'It's unclear what has been agreed to besides a sort of pathway to a framework to implement a concept of a plan. So it's early days,' said trade and economic policy expert Deborah Elms. 'But I suppose that the good news is, both sides do seem to see that escalation is not in their interest, and they agree that negotiations or discussions are important pathways to get to some kind of resolution.' GROWING WEAPONISATION OF RESOURCES However, analysts highlighted how countries have been weaponising their strategic commodities to gain an edge. China's dominance in rare earth minerals and America's lead in semiconductor innovations have become geopolitical bargaining chips. 'That is something that's here to stay,' said Capri. 'I think it's going to be more and more the new normal to see a linkage between tariff discussions and discussions about strategic supply chains such as rare earth and semiconductors.' He added: 'We're looking at a very transactional world, certainly under the Trump 2.0 administration where tariffs, export controls, sanctions, all of these things are going to be lumped together now in trade-related and commercial discussions.' Although the initial focus was tariff reduction, experts cautioned that these strategic issues could derail momentum. 'Both sides have identified that they have some cards to play in this dispute, and both have shown a willingness to use those if the negotiations start to unravel,' said Elms, who is head of trade policy at philanthropic organisation Hinrich Foundation. 'The tariff discussion is only a small piece of what is now on the agenda,' she told CNA's Asia Now. 'There's a whole lot of things that you could put on the negotiating cards for both sides. All of them are difficult.' COMPLEX NEGOTIATION CHALLENGES The high-stakes issues require compromise from both countries, Elms stressed. 'There are lots of things that could go horribly wrong in these discussions, unless they keep to the sort of bedrock principle that we do not want to have an escalation of tension going forward.' Despite the complexity of factors now on the negotiation table, she said she believes the concerted effort on both sides in reaching a deal is encouraging. 'I think talking is always better than not talking, but the fact that it's proving difficult to get clear outcomes is a worry.' On Tuesday, US Commerce Secretary Howard Lutnick said the agreement reached in London would remove some of the recent US export restrictions. In a separate briefing, China's Vice Commerce Minister Li Chenggang noted that the framework would be taken back to US and Chinese leaders for review. 'The fact that both sides have to fly back to present whatever was discussed in person to their leaders tells you something about the negotiating leverage that the teams had on the ground,' said Elms. 'In other words, they weren't authorised ahead of time to accept an agreement. I think that it shows you how complicated these talks will ultimately be.' IMPORTANCE OF STRATEGIC ALLIANCES Observers warned that countries lacking strategic resources may find themselves increasingly sidelined in global trade discussions. 'Unfortunately, for the middle-tier countries that don't have that same kind of bargaining power … those countries are going to have less choice,' said Capri. 'They're going to be pushed into positions where they're not going to be able to leverage a lot of things like the bigger countries when it comes to negotiating a trade deal, whether it's over tariffs or whether it's over access to supply chains.' He highlighted the importance of strategic alliances, encouraging smaller countries to join minilateral agreements to gain negotiating leverage. 'What's in the best interest of middle-tier countries is to build as many relationships as possible, to forge as many minilateral agreements,' said Capri. 'Smaller countries are going to be looking to position themselves and connect themselves with as many opportunities as possible.' Meanwhile, some countries are racing to strike a deal with the US before President Donald Trump's 90-day pause on his sweeping tariffs expires on Jul 9. Without agreements in place, countries may once again face the duties temporarily imposed on Apr 9. 'In any case, these are short deadlines for very complicated negotiations with an awful lot of trading partners,' said Elms. 'Ultimately, the decision maker is Donald Trump himself, and his capacity to manage all of these decisions is also time-limited. He only has so many hours in a day in which he could actually get into the details or even sign off on an agreed upon commitment.'

South-east Asia's polymer production crisis worsens as US-China trade shift looms
South-east Asia's polymer production crisis worsens as US-China trade shift looms

Business Times

time42 minutes ago

  • Business Times

South-east Asia's polymer production crisis worsens as US-China trade shift looms

[SINGAPORE] South-east Asia's petrochemical industry is facing a double whammy of weakening export demands and potential import surges, as trade tensions could redirect US polymer to the region's already-saturated market, sustaining pressure on production. Polyethylene (PE) and polypropylene (PP), as crucial downstream segments, are encountering 'considerable challenges' in the region, noted commodity markets intelligence firm Argus. This is amid trade uncertainty exacerbated by a US federal appeals court ruling on Wednesday (Jun 11) that President Donald Trump's tariffs can remain in place while it reviews an earlier court decision to block them. The latest ruling complicates newly drafted US-China plans to ease trade tensions. Argus highlighted that additional US polymer supply is anticipated to enter South-east Asia as part of trade flow redirection, driven by cost-competitiveness and the low likelihood of countries in the region imposing retaliatory tariffs on US cargoes. The London-headquartered research firm found that some US producers and regular exporters had already begun sending their cargoes to Vietnam instead of China. 'However, the situation remains fluid, and any continued shift in trade flows could contribute to additional supply entering the South-east Asian market,' the research firm said. A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up During the US-China trade war in Trump's first term in office, US polymer exports were redirected to countries in the Asia-Pacific. Specifically, US PE exports to Singapore and Malaysia rose by 328 per cent and 264 per cent, respectively, Argus noted in another report released on May 30. Plastic goods pressuring demand Meanwhile, trade uncertainty could prompt new trade routes for finished plastic goods, beyond the polymer trade. Chinese plastic products once bound for the US will likely seek alternative markets – including South-east Asia. This threatens to further strain the region's export-dependent finished goods sector, putting indirect downward pressure on polymer demand. In 2024, around 8 per cent of the US' imported finished plastic goods came from South-east Asian countries, which now see the risk of a significant fall in demand, noted Argus. Around 17 per cent of China's PE imports were from the US in 2024. The intelligence firm noted that South-east Asian countries could explore opportunities to increase run rates and export PE to China with low-cost feedstocks amid the trade tensions between the world's two largest economies. 'But this remains a challenge for the region, as it predominantly relies on naphtha as a feedstock, which is less cost-competitive than lighter options,' it added. It also said that limited upstream integration further disadvantages the region, compared with markets in the Middle East and North-east Asia, where more integrated supply chains enhance cost efficiency. China factor Other than trade uncertainty, China's expanding polymer production capacity also threatens to deepen South-east Asia's existing polymer production crisis, where some regional crackers had been in extended shutdowns since late 2024. Fumiko Dobashi, manager of Asia-Pacific chemicals price reporting at S&P Global, highlighted a trade dynamic between the US, China and Asia in a briefing on Jun 3: The US exports raw materials such as ethane, liquefied petroleum gas and polymers, while Asia ships back finished plastic products and rubber products. However, China has been expanding its polymer capacity, transforming itself into a net exporter from a net importer and adding to the polymer flood into nearby regions, said Dobashi. She noted that while the US remains a major polymer exporter, the trend of China becoming a significant player continues, with the country increasing its exports to Asean nations such as Vietnam. Declining operating rates Over the past five years, South-east Asia's PE and PP operating rates have declined by 25 per cent and 20 per cent, respectively, on average as exports fell and imports rose, Argus noted. Meanwhile, the region's PP net trade position has shifted from net exporter to net importer since 2022; as has its PE trade position since 2024, amid China's accelerated progress towards self-sufficiency and increasing exports. Specifically, China's PP exports into the region have trebled to 636,000 tonnes over the past five years, mainly to Vietnam and Indonesia. China's focus on self-sufficiency also significantly reduced South-east Asia's PE and PP exports by 1.8 million tonnes, or 37 per cent, over the same period, according to the research firm. It added that the region's polymer prices will be further depressed by shrinking downstream export demand and more supply entering the market.

Japan remains cautious on tariff impact in June econ report
Japan remains cautious on tariff impact in June econ report

CNA

timean hour ago

  • CNA

Japan remains cautious on tariff impact in June econ report

TOKYO :Japan's government reiterated its warning on the risks from U.S. tariffs on economic growth, saying in a monthly report on Wednesday that the potential impact on corporate profits needed attention. The economy faces pressure from U.S. import levies of 24 per cent from July unless officials can negotiate them down. Japan's government is also seeking an exemption for its carmakers from a separate 25 per cent import tariff on vehicles. Japan's gross domestic product shrank an annualised 0.2 per cent in the January-March quarter, even before U.S. President Donald Trump announced his so-called "reciprocal" tariffs on April 2. "The economy is recovering moderately, while uncertainty is arising from U.S. trade policies," the Cabinet Office said in its monthly report for June released on Wednesday, keeping the assessment unchanged for a third month. In addition to tariffs, the report maintained its reference to "the effect of continued price rises on household sentiment and consumption" as another negative risk to the economy. It also noted that corporate profits were recovering, citing first-quarter business statistics, but added a fresh reference to the potential impact of trade disruptions. "With some firms withholding financial forecasts amid uncertainties surrounding U.S. tariffs, their impact on earnings may come to light only in the data for the April-June quarter or beyond," an official at the Cabinet Office told a press briefing. While no significant impact from U.S. tariffs on Japan's export volumes has been seen so far, trade trends from May onwards required attention, the official added. On wages, this spring's pay negotiations probably led to an average raise of more than 5 per cent, exceeding last year's, although smaller firms lagged bigger companies, the official said, based on the national labour group Rengo's data. Prime Minister Shigeru Ishiba said earlier this week that his ruling party would pledge to achieve growth of more than 50 per cent in Japan's average income by 2040 in campaigning for the upper house elections next month.

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into the world of global news and events? Download our app today from your preferred app store and start exploring.
app-storeplay-store