Picture: 123RF/PIX NOO
Picture: 123RF/PIX NOO

London — Oil prices rose on Tuesday after China signaled progress in trade talks with the US, but gains were capped by bearish forecasts of a build-up in US crude stockpiles.

Brent crude oil was up 31c at $59.27 a barrel by 10.21am GMT, while US West Texas Intermediate (WTI) crude was 16c higher at $53.47 a barrel.

China and the US have achieved some progress in their trade talks, vice-foreign Minister Le Yucheng said on Tuesday, and any problem could be resolved as long as both sides respected each other.

“While the encouraging mood across financial markets will remain stimulated by trade optimism, risk aversion could still make an abrupt return should talks drag on or turn sour,” said Lukman Otunuga, analyst at FXTM.

Last week, the International Monetary Fund (IMF) forecast that fallout from the US-China trade war and trade disputes across the world would slow global growth in 2019 to 3.0%, the weakest in a decade. Lower economic growth typically means reduced demand for commodities such as oil.

Oil prices, however, were pressured by forecasts of a build-up in US crude stockpiles. Inventories are expected to have risen for a sixth straight week, while distillates and petrol stocks likely fell in the week to October 18, a Reuters poll showed.

The poll was conducted ahead of reports from the American Petroleum Institute (API), an industry group, and the Energy Information Administration (EIA), an agency of the US department of energy.

“Expectations that the API and EIA will report that US crude oil inventories increased by about 3-million barrels over the past week certainly do not help sentiment,” ING analyst Warren Patterson said. “These more visible stock builds, along with demand concerns continuing to linger, suggest it is becoming increasingly difficult to see a sustained rally in prices ahead of the oil cartel Opec+ meeting in early December.”

Opec, Russia and other oil producers, an alliance known as Opec+, have pledged to cut production by 1.2-million barrels per day (bpd) until March 2020. The producers meet again on December 5-6.

Russian energy minister Alexander Novak said US oil production is likely to peak in the next few years as current oil prices are capping the pace of expansion. Goldman Sachs has wound back its forecast for growth in US shale oil output in 2020, and slightly reduced its outlook for 2020 global oil demand growth.

Reuters