Tariff pause provides short term relief – ING
Sentiment across risk assets improved with the pause in US-China tariffs, OCBC's FX analysts Frances Cheung and Christopher Wong note.
Supply side should to keep downward pressure on the market
"The move to reduce tariffs for 90 days was certainly more aggressive than many expected, highlighted by the big upward moves in risk assets, including oil. However, while a thawing in trade tensions between China and the US is helpful, there’s still plenty of uncertainty over what happens in 90 days. This uncertainty could continue to generate headwinds for oil demand."
"Though demand has been a key concern for the oil market, supply increases from OPEC+ mean that the oil market will be well supplied through the remainder of the year. How well supplied depends on whether OPEC+ sticks with the aggressive supply hikes we saw for May and June."
"Interestingly, despite the strength in the ICE Brent flat price yesterday, the prompt time spread weakened. Also, the forward curve suggests the market may become increasingly more comfortable with supply towards year-end. For now, the pause in US-China trade tensions has not caused us to revise our price forecasts. The supply side should keep downward pressure on the market."
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FXStreet Insights Team
FXStreet
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