Why this week's US-China commerce talks are an enormous deal for oil costs


According to Sen, oil prices fell too far, too fast, largely due to technical factors such as automated trading strategies. On the supply side, production cuts by major oil producers and slower-than-expected U.S. output will help oil prices recover, she says. Whether or not the market is oversupplied will largely boil down to demand.

“At current levels, based on current fundamentals, the market is oversold,” Sen said. “But it doesn’t mean that it’s going to correct straightaway, right? It can still take some time, unless and until you have the clarity, particularly with the trade talks over today and tomorrow.”

The main driver for oil prices right now is the strength or weakness of broader financial markets and the mood around the economy, says Vandana Hari, founder of energy markets consultancy Vanda Insights. Whether or not OPEC and other major producers including Russia will stick to their production cuts is now a secondary concern, in her view.

In the coming days, oil prices will likely follow stocks on news from the U.S.-China trade talks, Hari says. But she also expects sentiment about the ongoing negotiations and underlying economic concerns to steer oil prices for the next few months.

“From an oil markets perspective, what would be very important to keep in mind is this is going to be a highly volatile environment,” she told CNBC Asia’s “Squawk Box.”

“Today and tomorrow are the first days of the talks this year, but then these are expected to continue. Nobody is expecting a huge breakthrough or a complete solution to this any time soon.”



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