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Oil drops 1 percent on U.S.-China trade talks، American supply surge

Thursday 10/January/2019 - 01:04 PM
Sada El Balad
edited by: Rehab Sayed
Oil prices fell more than 1 percent on Thursday due to the lack of any clear resolution to U.S.-China trade talks and official data that again indicated vast fuel stocks in the United States. Reuters said.
U.S. West Texas Intermediate (WTI) crude oil futures CLc1 were at $51.66 per barrel at 0950 GMT، down 70 cents، or 1.3 percent، from their last settlement.

International Brent crude futures LCOc1 were also down 1.3 percent، or 79 cents، at $60.65 per barrel.

Both benchmarks rose by around 5 percent the previous day، capping off a week-long climb that marked oil’s longest sustained rise since last summer.

Global financial markets had surged on hopes that Washington and Beijing may soon end their dispute and avert an all-out trade war between the two biggest economies.

Some of the positive feeling ebbed on Thursday، however، a day after negotiations wrapped up with mildly positive statements from both sides but few details.

The U.S. Trade Representative’s offices said in a statement on Wednesday that the two sides discussed “ways to achieve fairness، reciprocity and balance in trade relations”.

China’s Commerce Ministry said the talks “established a foundation for the resolution of each others’ concerns”.

Vandana Hari of consultancy Vanda Insights in Singapore said oil prices dropped “as optimism fueled by the U.S.-China trade talks earlier in the week appeared to have run its course، and official statements after the conclusion of three days of negotiations، while indicating modest progress، lacked details”.

Meanwhile، U.S. bank Morgan Stanley cut its 2019 oil price forecasts by more than 10 percent on Wednesday، pointing to weakening economic growth expectations and rising oil supply، especially from the United States.

The bank now expects Brent to average $61 a barrel this year، down from a previous estimate of $69، and U.S. crude to average $54، against a prior forecast of $60.

The main source of new supply is the United States، where crude oil production C-OUT-T-EIA remained at a record 11.7 million barrels per day in the week ended Jan. 4، the Energy Information Administration said on Wednesday.

That has resulted in swelling fuel inventories.

The surge in U.S. production runs counter to efforts led by the Organization of the Petroleum Exporting Countries to cut supply and rein in an emerging glut.

“Balancing the market would require OPEC discipline to continue well into 2020،” Morgan Stanley said.

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