US crude settles 0.6% lower at $52.41 per barrel as slow progress in trade talks counters OPEC cuts

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Oil tanker

Jean-Paul Pelissier | Reuters

Oil prices fell on Monday as worries surrounding the resumption of U.S.-China trade talks overshadowed support from OPEC-led supply restraint.

Brent crude futures lost 63 cents, or 1 percent to $61.46 a barrel. U.S. West Texas Intermediate (WTI) crude settled 0.6 percent lower at $52.41 per barrel.

Trade talks between the United States and China resumed with working level discussions before high-level discussions later in the week.

While Beijing struck an upbeat note, it also expressed anger at a U.S. Navy mission through the disputed South China Sea. This cast a shadow as the two countries try to reach a deal before the March 1 deadline when U.S. tariffs on $200 billion worth of Chinese imports are scheduled to increase to 25 percent from 10 percent.

On Thursday, U.S. President Donald Trump said he did not plan to meet with Chinese President Xi Jinping before the March 1 deadline, dampening hopes of a quick trade pact.

Escalating U.S.-China trade tensions have cost both countries billions of dollars and disrupted global trade and business flows, roiling financial markets.

“There’s a lot of uncertainty about what’s going on with this trade war, whether they’re going to get anything done,” said Phil Flynn, oil analyst at Price Futures Group in Chicago. “You’ve got concerns about slowing growth.”

Still, oil prices have been buoyed this year by output curbs from the Organization of the Petroleum Exporting Countries and its allies, including Russia, a group known as OPEC+.

The deal, effective from January, aims to cut 1.2 million barrels per day until the end of June to forestall an supply overhang. Suhail Al Mazrouei, the Energy Minister of the United Arab Emirates, said on Monday the oil market should achieve this balance in the first quarter of 2019.

OPEC and its allies meet on April 17 and 18 in Vienna to review the agreement, but a draft cooperation charter seen by Reuters fell short of a new formal alliance among the producers.

U.S. sanctions on Venezuela, along with older sanctions on fellow OPEC member Iran, have also prevented crude prices from falling further.

Venezuela President Nicolas Maduro has sought OPEC support against the sanctions, citing their impact on oil prices and potential risks for other members of the producer group.

Oil falls on economic slowdown, but OPEC output cuts offer some support

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  • Both international Brent and U.S. crude futures declined.
  • Weighing on financial markets, including crude oil futures, were concerns that trade disputes between the United States and China would remain unresolved, denting global economic growth prospects.
  • On Thursday, the European Commission sharply cut its forecasts for euro zone economic growth as it expects global trade tension and an array of domestic challenges.

Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Spencer Platt | Getty Images
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Oil markets fell on Friday, pulled down by an economic slowdown, although supply cuts led by producer club OPEC and U.S. sanctions against Venezuela provided crude with some support.

U.S. West Texas Intermediate (WTI) crude futures stood at $52.20 per barrel by 0351 GMT, down 44 cents, or 0.8 percent, from their last settlement. WTI dropped by around 2.5 percent the previous session.

International Brent crude oil futures were down by 44 cents, or 0.7 percent, at $61.19 per barrel, after falling 1.7 percent the previous session.

Weighing on financial markets, including crude oil futures, were concerns that trade disputes between the United States and China would remain unresolved, denting global economic growth prospects.

U.S. President Donald Trump said on Thursday he did not plan to meet with Chinese President Xi Jinping before a March 1 deadline set by the two countries to strike a trade deal.

If there is no agreement between the world’s two biggest economies, Trump has threatened to increase U.S. tariffs on Chinese imports. Another round of talks is scheduled for next week in Beijing.

“Crude prices returned to the lows of the week as slower growth prospects…could signal a return (of reasons) for inventories to rise,” said Edward Moya, market analyst at futures brokerage Oanda.

On Thursday, the European Commission sharply cut its forecasts for euro zone economic growth as it expects global trade tension and an array of domestic challenges.

The Commission said growth this year would slow to 1.3 percent from 1.9 percent in 2018, before rebounding in 2020 to 1.6 percent.

Despite this, traders said crude prices were prevented from falling much further by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC), adopted late last year with the aim of tightening the market and propping up prices.

As part of the cuts, Saudi Arabia – the world’s biggest crude exporter – cut its output in January by about 400,000 barrels per day (bpd) to 10.24 million bpd, according to OPEC sources.

That puts Saudi crude oil production almost 1.7 million bpd below that of the United States, which has been churning out around 11.9 million bpd in late 2018 and early 2019 – up by more than 2 million bpd from a year earlier.

Another risk to supply comes from Venezuela after the implementation of U.S. sanctions against the OPEC member’s petroleum industry in late January. Analysts expect this move to knock out 300,000-500,000 bpd of exports.

Yet for the time being, the sanctions impact on international oil markets was limited.

“The (Venezuela) disruption overall seems manageable both for the U.S. and the global market,” said Norbert Rücker, head of commodity research at Swiss bank Julius Baer. “The oil market sits on a comfortable cushion of supply.”

Oil caught between trade talk hopes, weak China data

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  • Oil prices were caught between hopes that Washington and Beijing could soon settle their trade disputes and fresh concerns over China’s economy..

Oil tanker

Jean-Paul Pelissier | Reuters

Oil prices held steady on Friday, torn between hopes the United States and China could soon settle their trade disputes and new data raising fresh concerns over China’s economic slowdown.

International Brent crude oil futures were at $60.87 per barrel at 244, 3 cents above their last close.

U.S. West Texas Intermediate (WTI) futures were at $53.70 per barrel, down 9 cents, or 0.2 percent their last settlement.

Oil futures received support from a broader financial market rally, which saw Asian shares hit four-month highs on Friday on hopes the United States and China could strike a trade deal.

U.S. President Donald Trump said on Thursday he will meet with Chinese President Xi Jinping soon to try to seal a comprehensive trade deal as Trump and his top trade negotiator both cited substantial progress in two days of high-level talks.

Yet prices were weighed down by a survey on Friday that showed China’s factory activity shrank by the most in almost three years in January amid slumping orders, reinforcing fears a slowdown in the world’s second-largest economy is deepening.

Despite these concerns, traders said oil markets overall are being supported by supply cuts from the Organization of the Petroleum Exporting Countries (OPEC), which according to a Reuters poll pumped 30.98 million barrels per day (bpd) in January, down 890,000 bpd from December.

In Venezuela, meanwhile, U.S. sanctions imposed on state oil firm PDVSA this week are keeping tankers stuck at ports and are expected to accelerate the supply drop in February.

“The latest U.S. sanctions could directly halt around 500,000 barrels per day (bpd) of Venezuelan exports to the U.S.,” Citi bank said.

Much Venezuelan crude oil is rated as heavy and requires the light petroleum naphtha, much of it supplied from the United States, for dilution before export to refineries.

“An additional 350,000 bpd of Venezuelan oil output is at risk due to the lack of U.S. dilutents, a result of the U.S. product exports ban with immediate effect,” Citi said.

Oil steady on hopes Chinese fiscal stimulus will stem economic slowdown

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  • Both Brent and U.S. crude futures were mostly firm.
  • Chinese finance ministry officials said on Wednesday that the government would step up fiscal spending this year to support its economy.

A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.

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A truck used to carry sand for fracking is washed in a truck stop in Odessa, Texas.

Oil prices were steady on Wednesday on hopes that increased Chinese spending would stem an economic slowdown that is showing signs of spreading and has been weighing on financial markets.

International Brent crude oil futures were at $61.49 per barrel at 0314 GMT, virtually unchanged from their last close.

U.S. West Texas Intermediate (WTI) crude futures were at $52.98 per barrel, 3 cents below their last settlement.

The steadier prices followed a 2-percent fall in crude futures and a slump in international financial markets on Tuesday as concerns over global growth spooked investors into looking for safe-haven assets such as government bonds or gold.

Japan on Wednesday reported that its December 2018 exports fell by 3.8 percent, the most in more than two years, dragged down by plummeting shipments to China and wider Asia as weak global demand and U.S.-Sino trade frictions take their toll on the trade-reliant economy.

A widespread economic slowdown is expected to also dent growth in demand for fuel, weighing on energy prices.

Steen Jakobsen, chief economist at Denmark’s Saxo Bank, said in a first quarter 2019 outlook that “the global economy is suffering”, but added that China’s government will do all it can for stability.

Chinese finance ministry officials said on Wednesday that the government would step up fiscal spending this year to support its economy.

Another key support would be for the United States and China to find a solution to their bitter trade dispute, Jakobsen said, but to prevent a sharp economic slowdown, a solution needs to show itself before Feb. 5, the Lunar New Year.

Should a deal be reached by then, “we will see powerful support for the Chinese economy”, he said, as well as the launch of strong stimulus programs to keep the economy growing.

Despite this, Jakobsen warned that stimulus programs could not keep the economy going forever, and there was a large risk of another downturn in 2020.

Providing oil prices with support in 2019 have been production cuts led by the Organization of the Petroleum Exporting Countries (OPEC), aimed at reining in an emerging supply overhang.

Whether OPEC’s efforts will be successful will also depend on the development of oil production in the United States, where crude output jumped by 2 million barrels per day (bpd) in 2018 to an unprecedented 11.9 million bpd.

The boom was largely fueled by onshore shale oil drilling. And while the U.S. Energy Information Administration (EIA) said on Tuesday that it expected shale output to rise further, it said that production growth would slow in the coming years.

Oil prices edge down as global growth worries threaten demand

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  • Both Brent and U.S. crude futures slipped.
  • The International Monetary Fund trimmed its global growth forecasts on Monday.

Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Spencer Platt | Getty Images
Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.

Oil prices edged lower on Tuesday as concerns over global economic growth stoked fears over future demand.

International Brent crude oil futures were down 10 cents, or 0.2 percent, at $62.64 by 0106 GMT. They closed down 0.1 percent on Monday.

U.S. West Texas Intermediate (WTI) crude futures were at $53.70 per barrel, down 0.1 percent, or 4 cents.

“Trade war concerns have reduced global growth expectations and with it comes a lower demand for energy,” said Alfonso Esparza, senior analyst, OANDA.

The International Monetary Fund trimmed its global growth forecasts on Monday and a survey showed increasing pessimism among business chiefs, highlighting the challenges facing policymakers as they tackle an array of actual or potential crises, from the U.S.-China trade war to Brexit.

Also clouding the outlook was data showing a slowdown in growth in China, the world’s second biggest economy.

However, oil prices were offered some support in the wake of recent data that indicated major exporters were beginning to curtail production.

In the United States, energy services firm Baker Hughes said that energy companies cut the number of rigs drilling for oil by 21 last week, the biggest decline in three years and taking the count down to the lowest since May, 2018 at 852.

The Organization of the Petroleum Exporting Countries (OPEC)on Friday published a list of oil output cuts by its members and other major producers for the six months to June, an effort to boost confidence in a move designed to avoid a supply glut in 2019.