Oil prices drop as trade war concerns haunt market

FILE PHOTO: Oil pump jacks work at sunset near Midland, Texas, U.S., August 21, 2019 - Reuters

LONDON/SINGAPORE (Reuters): Oil prices slipped for a second straight session yesterday as a slowing global demand outlook outweighed OPEC’s deal with associated producers last week to deepen output cuts in 2020.

Brent crude was down 17 cents, or 0.3%, at $ 64.08 per barrel by 0954 GMT while West Texas Intermediate oil was down 21 cents, or 0.4%, lower at $ 58.81 a barrel.

The benchmarks fell 0.2% and 0.3% respectively on Monday.

Last week, the Organization of the Petroleum Exporting Countries (OPEC) and associated producers like Russia agreed to deepen output cuts from 1.2 million barrels per day (bpd) to 1.7 million bpd to support prices.

However, crude prices have fallen this week as a 15 December deadline for the next round of US tariffs on Chinese imports loomed over markets.

“Now with OPEC+ meetings out of the way, the market will likely focus back to trade talk developments, particularly with the 15 December deadline fast approaching,” ING analyst Warren Patterson said.

US President Donald Trump does not want to implement the next round of tariffs, US Agriculture Secretary Sonny Perdue said on Monday - but he wants “movement” from China to avoid them.

Tamas Varga of oil broker PVM said further US tariffs on Chinese goods “will have a tangible impact both on commodities and equities, at least in the immediate future.”

Data released on Sunday showed exports from China in November fell 1.1% from a year earlier, confounding expectations for a 1% rise in a Reuters poll.

The market is also on edge as deadline looms over other events this week, with the British election on Thursday and US and European Central Bank meetings.

Gazprom Neft (SIBN.MM) CEO Alexander Dyukov said yesterday a decision by OPEC and its allies to cut output would help support oil prices at $ 55-65 per barrel in the first quarter.

US crude oil inventories were expected to have dipped last week, while stocks of refined products were seen higher with gasoline stocks set to rise for the fifth straight week, a preliminary Reuters poll showed.