Future of oil prices in short to medium term.

Byline: Ahsan Nisar

Presently, US-China trade war is the single most important factor that is governing oil demand and hence its international price. Even global economic growth hinges upon striking a deal between the two power houses. The markets appear to have turned bearish with supply/demand imbalances. Adding fuel to the fire, Saudi Aramco drone attacks was an epic event that led to the biggest supply disruption in history and provides temporary support for higher oil prices.

Although the current environment may not be conducive for higher oil prices but there are certain factors that support upward price trajectory. Higher oil prices will also support launch of Aramco's IPO, the world's largest listing ever. This article aims to analyze various factors that support bullish oil prices as and when a trade deal is reached between China and the US.

US-China deal

The long-running trade war between the world's two biggest economies has brought about a general slowdown to the global economy. Negotiations between Washington and Beijing have been long, intermittent and protracted with plenty of blame game from both sides. However, there seems to be some light at the end of the tunnel as in the first phase of the interim deal, the warring nations have agreed to a phased rollback of extra tariffs. This will be enough for relieving economic tensions for next year. Currently, oil is trading in the range of $55-$60; a US-China deal will support prices in the range of $60-$65.

Geopolitical risks

Theoretically, rising geopolitical risks, particularly in the Middle East - home to more than 60 percent of the world's oil reserves - is bullish for oil. Tensions between Iran and Saudi Arabia reached a boiling point following the September 14th attacks on Aramco's oil facilities. Apart from China, US have...