Picture: REUTERS
Picture: REUTERS

London — Oil prices fell for a second day on worries that fuel demand could fall after US President Donald Trump doused recent optimism over China-US trade talks, at a time of rising US crude oil stockpiles.

Brent crude futures were down $1.03c to $62.07 a barrel by 8.11am GMT on Wednesday, erasing all gains made after an attack on Saudi oil facilities sent the benchmark up about 20% last week. Nevertheless, the benchmark remains on track for its first monthly gain since June.

US West Texas Intermediate (WTI) crude dropped to $56.49 a barrel, down 80c.

“Focus will return to faltering oil demand concerns as there is unlikely to be any quick resolution to US-China trade differences to positively shift economic expectations,” global oil strategist at BNP Paribas Harry Tchilinguirian told the Reuters Global Oil Forum. “Barring a repeat attack on Saudi infrastructure, oil will weaken further.”

Trump criticised China’s trade practices at the UN General Assembly on Tuesday and said he would not accept a “bad deal” in US-China trade negotiations. China is the world’s largest oil importer and second-largest crude user. The US is the largest consumer of oil.

Trump also said he saw a path to peace with Iran even as he denounced Iran for “bloodlust”, cooling other risk premiums built into oil prices.

Others, such as OCBC Bank economist Howie Lee, saw more potential upside, pointing to the possibility that buyers of Saudi crude could be made to look for supplies in the spot market and push prices higher again if Saudi stocks run out. 

“Right now, the market is very concerned about the demand side of the equation, but I would caution against being complacent about what’s happening in the Middle East,” Lee said.

Oil rallied last week following a crippling attack on Saudi Arabia’s oil installations that has disrupted supplies from the world’s top exporter. To meet its supply obligations to Saudi refineries overseas, Saudi Aramco is buying oil from other Middle East producers.

Prices were also weighed down by an unexpected build in US crude inventories last week. US crude inventories rose 1.4-million barrels last week, the American Petroleum Institute (API) said on Tuesday, compared with analysts’ forecasts of a 200,000-barrel drawdown.

Official government data from the US Energy Information Administration (EIA) are due to be released at 2.30pm GMT.