Venezuela oil tankers. Picture: BLOOMBERG
Venezuela oil tankers. Picture: BLOOMBERG

London — Oil prices were steady on Friday, with crude benchmarks poised for multiweek gains amid a sharp drawdown in US crude inventories, while trade tensions eased as Washington and Beijing agreed to hold high-level talks in October.

Brent crude was down three US cents at $60.92 a barrel by 8.50am GMT, while US West Texas Intermediate (WTI) crude was down 10c at $56.20 a barrel.

Brent is set to mark its fourth weekly gain, while US crude is headed for a second weekly rise.

On Thursday, Beijing and Washington agreed to hold high-level talks in early October in Washington, cheering investors hoping for an end to the trade war between the world's two biggest economies that has brought tit-for-tat tariff hikes, chipping away at economic growth.

The prolonged dispute had a dampening effect on oil prices, although they have risen over the year, helped by production cuts led by oil cartel Opec and ally Russia to drain inventories.

"If trade tensions escalate further, oil demand growth may soften even more, requiring much lower prices," Giovanni Staunovo, oil analyst for UBS, said in a note analysing oil market trends for 2020.

"On the other hand, unexpected supply disruptions in the Middle East or a surprise production cut by Opec and its allies may push oil prices higher".

US crude and product inventories fell last week, with crude drawing down for a third consecutive week despite a jump in imports, the Energy Information Administration (EIA) said.

Crude stocks dropped 4.8-million barrels, nearly double analysts' expectations, to 423-million barrels, their lowest since October 2018.

Oil prices on Thursday soared more than 2% after the EIA report, although they gradually trimmed gains as investors are not entirely convinced that the China-US trade talks will yield results.

"There is still no getting away from lingering demand-side concerns," said Stephen Brennock of oil broker PVM.

"Consequently, any looming upside potential will be built on wobbly foundations so long as the US and China continue to do battle on the trade front."

In another sign of a possible global economic slowdown, data released on Friday showed German industrial output unexpectedly fell in July, putting Europe's biggest economy at risk of falling into a a recession in the third quarter.

European markets slipped from one-month highs and the upbeat mood brought on by progress toward US-China trade talks seemed to fade as markets awaited US jobs data later on Friday.

Reuters