Oil edges lower on new US-China trade deal worries
Opec and its allies are likely to extend oil output cuts until mid-2020 when they meet in December
London/Singapore — Oil prices edged lower on Thursday as fresh tensions between the US and China over protests in Hong Kong fueled concern that a deal to end a trade war between the world’s top two economies may be further delayed.
Brent crude fell 28c, or 0.4%, to $62.12 a barrel by 11.22am GMT, while West Texas Intermediate (WTI) crude was down 23c, or 0.4%, at $56.78. Both benchmarks had risen strongly on Wednesday due to bullish data on US crude inventories.
US President Donald Trump is expected to sign two bills passed by Congress intended to support protesters in Hong Kong. This followed a Reuters report that completion of a “phase one” US-China trade deal could slide into next year.
The potential delay could mean the US administration will implement new tariffs on imports from China, escalating the tensions, experts say.
“Under this scenario, both equities and oil are expected to come under pressure. As talks hit a snag, an upside breakout from the current trading range all of a sudden has become less imminent,” Tamas Varga of oil brokerage PVM said.
However, in an attempt to allay fears, the Chinese commerce ministry said that China would strive to reach a phase-one trade agreement with the US. The Wall Street Journal also reported on Thursday, citing unnamed sources, that China had invited top US trade negotiators for a new round of talks in Beijing.
On Wednesday, data from the US government’s Energy Information Administration (EIA) showed US crude stocks had risen by a less-than-expected 1.4-million barrels in the week to November 15.
Opec and its allies (Opec+) are likely to extend oil output cuts until mid-2020 when they meet in December, with non-Opec producer Russia supporting Saudi Arabia’s push for stable oil prices amid the listing of state oil giant Saudi Aramco.
Opec sources told Reuters that formally announcing deeper cuts looked unlikely for now although a message about better compliance with existing curbs could be sent to the market.
Russian President Vladimir Putin said on Wednesday that Russia and Opec have “a common goal” of keeping the oil market balanced and predictable, and Moscow would continue co-operation under a global deal cutting oil supply.
Said Benjamin Lu, analyst at Singapore-based brokerage Phillip Futures, “Russian commitment on an extended supply-curb deal, though supportive of oil prices, will continue to struggle against headwinds on global trade issues.”