Oil falls as US-China trade deal prospects dim

Daniel Fowler
November 16, 2019

Trump also said that there had been inaccurate reports about the American desire to lift rates in the framework of an agreement "a phase", news that had buoyed markets.

In fact, President Trump poured could water on Friday over (exaggerated?) optimism surrounding the "Phase One" deal with China, stressing that there is still no decision on any roll over existing tariffs.

Brent fell 8 cents to settle at $62.10 per barrel, and West Texas Intermediate dropped 8 cents to settle at $56.80 per barrel.

"Markets are weaker on macro noise generated by Trump-implied pessimism on the China trade deal", said Scott Shelton, energy futures broker at ICAP (LON:NXGN) in Durham, N.C.

Adding further support, US data showed that crude inventories at Cushing, the delivery point for WTI, fell about 1.2 million barrels in the week to November 8, traders said, citing market intelligence firm Genscape.

U.S. President Donald Trump said on Wednesday that the two countries were close to finalising a trade deal, but he fell short of providing a date or venue for the signing ceremony, disappointing investors. He also there had been incorrect reporting about U.S. willingness to lift tariffs. The contract also went up by 1.3 per cent in the preceding week.

"Technically the flat price of crude oil has not been able to align repetitive patterns and WTI still needs to convincingly break the resistance of the 200-day moving average", Jakob said.

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While crude prices have picked up over the past month, they're still down about 15% from the peak reached in April as the ongoing trade dispute between the US and China saps an already-fragile global economy, crimping fuel consumption.

Underlining the effect of the trade war, information over the weekend confirmed that China's producer costs fell the most in additional than three years in October, because the manufacturing sector weakened, hit by the dispute and declining demand. Meanwhile, Wood Mackenzie Ltd. said it sees a "pretty high chance" that Opec and its allies will slightly extend production cuts next month.

On the negative side, another significant build in U.S. crude oil supplies have dented the mood among traders in line with downbeat headlines from the OPEC+ event next month.

Cushing inventories have grown for five weeks in a row, according to government data, up till its latest report in the week ending Nov 1.

Investors remain hostage to the rapid shifts in the US-China trade negotiations, Stephen Innes, Asia Pacific market strategist at AxiTrader, said in a note.

Both sets of data suggest that China's economic growth continues to slow down, which, combined with an overall global economic growth slowdown, doesn't bode well for oil demand growth, and consequently, oil prices.

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