NEW YORK (Reuters) – Oil prices slumped more than 2% on Monday on worries that global crude demand could stay under pressure as a lack of details about the first phase of a U.S.-China trade deal dimmed hopes for a quick resolution to the tariff fight.
FILE PHOTO: Oil rigs are seen at Vaca Muerta shale oil and gas drilling, in the Patagonian province of Neuquen, Argentina January 21, 2019. REUTERS/Agustin Marcarian/File Photo
Brent crude LCOc1 dropped $1.26, or 2.1%, to $59.25 a barrel by 12:19 p.m. EDT, while U.S. West Texas Intermediate (WTI) crude CLc1 lost $1.20, or 2.2%, to $53.50 a barrel.
Late on Friday, Washington and Beijing outlined the first stage of a trade deal and suspended this week’s scheduled U.S. tariff hikes. Brent and WTI rose more than 3% last week, their first weekly increase in three, on signs of progress toward a trade deal that would boost crude demand.
But existing tariffs remain in place and officials on both sides said much more work was needed before an accord could be agreed.
The market was reacting to a “less than robust trade agreement with China where we’re still awaiting details,” said Andy Lipow, president of Lipow Oil Association in Houston.
“That is in the face of declining demand growth forecasts for the oil market that we’ve seen come out over the last several months.”
A good portion of the gains last week came after the United States announced on Friday it was deploying more troops to Saudi Arabia, and after an Iranian oil tanker was attacked in the Red Sea.
“While the market waits for potential responses from the Iranians, the continued inability of geopolitics to sustain price gains is a testament to the state of concerns over demand,” JBC analysts said in a note.
Oil prices drew support from worries that further escalation along the Syrian and Turkish border could affect output or exports from Iraq. Syrian troops entered a northeastern town on Monday.
The Saudi energy minister, Prince Abdulaziz bin Salman, said oil exporters were showing serious commitment to global output cuts in a deal between OPEC and its allies, a grouping known as OPEC+.
Russian Energy Minister Alexander Novak said there were no talks underway to change the OPEC+ deal.
Kuwait’s oil minister said it was too early to discuss a possible buildup in oil inventories in 2020. Khaled al-Fadhel said a price range of $50-70 per barrel would be acceptable.
The compliance of OPEC+ producers with the supply-reduction agreement was seen at above 200% in September, sources familiar with the matter said.
China showed strong demand for oil, with its September imports rising 10.8% from a year earlier as refiners ramped up output.
Additoinal reporting by Bozorgmehr Sharafedin in London, Florence Tan and Seng Li Peng; Editing by Kirsten Donovan, Chris Reese and David Gregorio