Picture: REUTERS/CHRISTIAN HARTMANN
Picture: REUTERS/CHRISTIAN HARTMANN

London — Oil prices fell on Wednesday, dragged down by concerns about global economic growth as the US-China trade dispute rumbles on, but received some support from tightened supply.

International Brent crude oil futures were at $67.34 a barrel at 10.40am GMT, down 27c, or 0.4%. US West Texas Intermediate (WTI) crude futures were at $58.51 a barrel, down 52c, or 0.88%.

An eight-month trade war between China and the US has worried global markets already concerned by signs of a slowdown in economic growth this year. But there have been mixed signals that the stand-off between the world’s top two economies can soon be resolved.

A Bloomberg report on Tuesday citing concern among US officials that China is pushing back on American demands briefly weakened oil prices before both benchmarks again approached four-month highs.

However, Washington announced that US treasury secretary Steven Mnuchin plans to travel to China next week for another round of trade talks with senior Chinese officials.

“US-China trade talks continue to present a binary risk for the oil market and other risky assets,” BNP Paribas strategist Harry Tchilinguirian told the Reuters Global Oil Forum. “A trade agreement is likely to boost oil prices above current forecasts, whereas failure can lead to the type of sell-off we saw last December.”

Analysts said an economic slowdown could soon dent fuel consumption, holding back crude. “Global growth concerns and ongoing oversupply fears [are] creating headwinds for the commodity,” said Lukman Otunuga, analyst at futures brokerage FXTM.

Asian business confidence held near three-year lows in the first quarter as the US-China trade dispute dragged on, pulling down a global economy that is already on a downwards path, a Thomson Reuters/Insead survey found.

But crude prices have risen almost a third this year, pushed up by supply cuts by oil cartel Opec and its allies including Russia, as well as US sanctions against oil exporters Iran and Venezuela.

“The shaky supply outlook with regards to Venezuela and Iran, as well as the petro-nations’ output restrictions, are top of mind in the oil market,” said Norbert Rëcker, head of economics at Swiss bank Julius Bär.

Further boosting prices, the American Petroleum Institute (API) said on Tuesday that US crude, petrol and distillate inventories fell in the week to March 15.

The US Energy Information Administration (EIA) will publish its weekly crude production and storage level report at about 5pm GMT. 

Reuters