Oil Slides On Trade War Anxiety

Daniel Fowler
October 9, 2019

Prices extended losses slightly in post-settlement trade after American Petroleum Institute data showed US crude inventories rose by 4.1 million barrels in the week ended October 4, far surpassing the 1.4 million barrels analysts had forecast.

Chinese officials are signalling they're increasingly reluctant to agree to a broad trade deal pursued by President Trump, and a move by the U.S. to place eight Chinese technology companies on a blacklist due to alleged human-rights violations may add to tensions between the two countries.

Oil prices were also pressured by weak economic data after USA producer prices fell unexpectedly in September, weighed down by lower costs of goods and services, which could give the Federal Reserve room to cut interest rates again this month.

USA crude stockpiles increased by 3.1 MMbbl in the week ended September 27 to 422.6 million, according to Energy Information Administration data.

Brent for December settlement added 73 cents to $59.10 a barrel on the London-based ICE Futures Europe Exchange. "China deal", said Andy Lipow, president of Lipow Oil Association in Houston.

Brent crude futures LCOc1 edged down 28 cents to $58.09 a barrel by 0300 GMT, while U.S. West Texas Intermediate (WTI) crude CLc1 was at $52.64, down 17 cents.

Investors are treading cautiously before U.S.

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Oil prices were also pressured by an unexpected decline in US producer prices in September, which could give the Federal Reserve room to cut interest rates again this month.

International Monetary Fund Managing Director Kristalina Georgieva on Tuesday warned of a risk of complacency among countries.

The price of a barrel of oil on Tuesday was yet again on the back foot.

US stocks tumbled and the pan-European STOXX 600 index fell 1%. Without action to resolve trade conflicts and support growth, global economic deceleration could turn into "a more massive slowdown", she said. Analysts forecast crude inventories in the United States would show a fourth week of growth while gasoline stocks fell, a Reuters poll showed on Monday.

Bottom line: Oil prices are approaching a multi-month support zone and leaves the immediate short-bias at risk while above the 51-handle.

In Iraq, protests resumed overnight in Baghdad's Sadr City district.

"Any oil production disruption would occur at a time when Saudi Arabia has lost a significant part of its energy system redundancies (spare capacity)", he said.

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