Trade war takes ts toll
Market sent ment was strongly bull sh com ng nto October – w th many prom nent analysts expect ng the 4Q18 supply/demand balance to be the t ghtest quarter n recent h story. The focus was f rmly on the supply s de and on Iran an crude exports as sanct ons take hold. Very l ttle attent on was be ng pa d to Ch na, the key dr ver of global o l demand. The Shangha Compos te has been under pressure all year. Th s past week we have seen the Ch nese ndex take yet another leg lower – post ng fresh year-to-date lows last n ght. The market s now down just shy of 23% year to date mak ng t very d ff cult for the o l bulls to gnore go ng forward. There does not appear to be any rel ef on the hor zon. Just th s week Trump re terated h s bel ef that Ch na s not yet ready to make a deal. The G20 meet ng on November 30th w ll prov de the next opportun ty for Trump and Ch nese Pres dent X to reach an agreement on trade but we see that as h ghly unl kely. Unt l then the weak equ ty markets w ll l kely we gh on o l pr ces. On top of emerg ng market concerns, nventory data n the US and Europe has not been support ve as of late.