Slowing Chinese economy leaves oil lower
London — Oil prices fell on Monday after strong gains last week, as data released in China reinforced signs that its economy is slowing, though progress in China-US trade talks has supported prices.
Brent crude was down 32 US cents, or 0.5%, at $61.70 a barrel by 9.33am GMT, having gained more than 4% last week, its best weekly gain since September 20.
West Texas Intermediate (WTI) crude was down 33c, or 0.6%, at $56.33 a barrel, after rising more than 5% last week, also the biggest weekly increase since September 20.
Profits at Chinese industrial companies fell for the second straight month in September as producer prices continued their slide, highlighting the effect of a slowing economy and protracted US trade war on corporate balance sheets.
Still, traders were optimistic after the US trade representative’s office and China’s commerce ministry said on Friday the two countries were “close to finalising” some parts of a trade agreement.
“Looking further ahead, if trade talks continue to progress, and we see full agreement to phase 1 of the deal, this should help to improve sentiment further,” ING analyst Warren Patterson said.
US energy companies reduced the number of oil rigs operating this week, leading to a record 11-month decline as producers follow through on plans to cut spending on new drilling.
Russia’s energy ministry said Opec and its oil-exporting allies, known as Opec+, would factor in the slowdown of US oil output growth when they meet to discuss their output agreement in December.
However, Russian deputy energy minister Pavel Sorokin said it was premature to talk about deeper production cuts.
Since January, Opec+ has implemented a deal to cut output by 1.2-million barrel per day (bpd) to support the market. The pact runs to March 2020 and the producers meet to review policy on December 5-6.
“We are of the view that an extension of current cuts is path of least resistance for the producer group, while deeper cuts will be far more difficult to agree on,” global oil strategist at BNP Paribas Harry Tchilinguirian said.
Elsewhere, a suggestion by US President Donald Trump that Exxon Mobil or another US oil company could operate Syrian oil fields drew rebukes from legal and energy experts.
Money managers cut their net long US crude futures and options positions in the week to October 22, the US Commodity Futures Trading Commission said on Friday.