Daily Management Review

What to expect from G20 Buenos Aires summit?


11/29/2018


Oil markets are waiting for OPEC + meetings, but they can start making forecasts a few days earlier, after the G 20 summit, which will take place this weekend in Buenos Aires.



GoodFreePhotos
GoodFreePhotos
The capital of Argentina will host three main people in the oil sector: Saudi crown prince Mohammed Salman, Russian President Vladimir Putin and the American leader Donald Trump. The meetings will be held against the backdrop of a new excess of oil in the markets.

“We need to agree at the December meeting of OPEC +, which will be held next week in Vienna, about a significant reduction in oil production in order to balance the market next year,” Commerzbank said in a press release. - Preparatory negotiations are likely to take place on the sidelines summit G-20 in Buenos Aires.

If oil negotiations take place in the Argentine capital, they will most likely be kept secret. It will not be difficult to do this, because all the attention will be drawn to a meeting between Donald Trump and Vladimir Putin and, of course, to a meeting with PRC President Xi Jinping. The interest in meeting with Xi Jinping is clear: everyone has already felt the consequences of the trade war between the first two economies of the planet. Now Washington and Beijing are at the crossroads. Most analysts expect a breakthrough from the Argentinean meeting of Trump and Xi: Trump, whose mood is constantly changind, will either agree in Buenos Aires with the Chinese colleague about ending the trade war, or the negotiations will end up in nothing.

Donald Trump decided to set the stage for negotiations with Xi in Argentina in his own peculiar manner. In an interview with the Wall Street Journal, he called it very unlikely that a further increase in tariffs on Chinese goods would be postponed. Already introduced ten percent tariffs on Chinese goods totaling about $ 200 billion should rise in early 2019 to 25%. The President of America also added that if the Saturday meeting with Xi does not meet expectations, he will immediately fulfill the already declared threat and introduce new tariffs on Chinese goods totaling $ 267 billion. If the White House fulfills this threat, then practically all goods from the Eastern country will be charged with tariffs and duties.

Experts believe that the recently announced closure of five car factories of General Motors and dismissal of 14 thousand employees of this company are casualties of the trade war with China. And several closed factories are located in Michigan and Ohio, who voted for Trump two years ago.

A few months ago, the press service of Ford said that steel and aluminum tariffs would cost $ 1 billion. As for GM, it reported layoffs back in June.

GM's decision to shut down the plants will be particularly painful for President Trump. Perhaps it will make him think about development of relations with China.

China is suffering even bigger losses, but unlike Trump C, it should not report to voters. This will allow the country to cope with the situation better than Trump. On the other hand, it is not yet clear how much these considerations will influence the American president and whether they will force him to become more accessible. On the part of Beijing, obstacles to achieving a truce are not expected, because the Chinese from the very beginning are behaving in a markedly calm manner and are not the first to impose tariffs. However, if the Chinese president sees that the American side is in a difficult situation, he will try to squeeze the maximum out of the agreement.

Already on Sunday, it may become more or less clear which way the US-China trade relations will develop. Any outcome will have serious consequences for oil markets. Most economists have already predicted a downturn in the global economy in 2019. A further escalation of the trade war between the main economies will lead to a decrease in the demand for oil and, thus, to a further reduction in prices.

On the other hand, Trump can stop a trade war and, like after meeting with Kim, return home as a winner. Such a result will improve the situation on the oil markets.

source: reuters.com, cnbc.com






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