Oil prices fell on Tuesday, as investors worried that the unrelenting U.S.-China trade war would keep squeezing the global economy, and that swelling U.S. crude inventories would further pressure prices.
Losses were limited by optimism about a potential Brexit deal and signals from OPEC that further supply curbs are possible.
Global benchmark Brent futures lost 61 cents, or 1.0 per cent, to settle at $58.74 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 78 cents, or 1.5 per cent, to settle at $52.81.
Earlier in the session, both Brent and WTI fell by more than $1 a barrel following a report overnight that China’s factory gate prices in September declined at the fastest pace in more than three years. Also, customs data on Monday showed Chinese imports contracted for a fifth straight month.
The U.S.-China trade war will cut 2019 global growth to its slowest pace since the 2008-2009 financial crisis, the International Monetary Fund warned, but it said output would rebound if dueling tariffs were removed.
“The market continues to focus on a weakening global economic growth path that appeared little disturbed by last week’s apparent lack of significant progress at the US-China trade talks,” Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, said in a report.
On Friday, Trump said China had agreed to purchase $40 to $50 billion worth of American agricultural goods in a first phase of an agreement to end the trade war.
Chinese firms have purchased 700,000 tonnes of pork and 700,000 tonnes of sorghum from the United States this year to meet market demand, a foreign ministry spokesman said on Tuesday. U.S. government data pointed to smaller pork sales.
The oil market retraced early losses after reports Britain and the EU made headway in eleventh-hour talks to reach a Brexit deal.
“Britain seems they are getting closer to a Brexit deal with the EU, but it will probably be highly unlikely for enough progress to be made before the EU summit on Thursday,” Edward Moya, senior market analyst at OANDA in New York, said in a report.
Analysts said any deal that avoids a “hard” or no deal Brexit should boost economic growth.
Providing more support, OPEC Secretary-General Mohammad Barkindo said the Organization of the Petroleum Exporting Countries and allied producers “will do whatever (is) in its power” to sustain oil market stability beyond 2020.
OPEC, Russia and other producers have cut oil output by 1.2 million barrels per day to support the market. Yet an expected rise in U.S. crude inventories this week kept prices under pressure.
U.S. crude stocks probably grew for the fifth straight week, a preliminary Reuters poll showed.
U.S. oil inventory reports are due out from industry group the American Petroleum Institute on Wednesday and the U.S. Energy Information Administration on Thursday. The reports are delayed one day due to a U.S. government holiday.