Crude oil futures edged lower during mid-morning trade in Asia Tuesday amid fading optimism over trade talks between the US and China, with an expected increase in US crude stocks adding further downside pressure. At 10:35 am Singapore time (0235 GMT), ICE January Brent crude futures were down 11 cents/b (0.18%) from Monday’s settle at $62.33/b, while the NYMEX December light sweet crude contract was 9 cents/b (0.16%) lower at $56.96/b.
China is pessimistic about a trade deal because the US is not willing to roll back tariffs, according to media reports. China is also considering holding off on a deal because of the impeachment hearings against US President Donald Trump and the upcoming 2020 US election, according to one report. “Crude oil prices fell as the US-China trade deal appeared to drift further away. Chinese officials were pessimistic about the chances of coming to agreement,” ANZ analysts said in a note Tuesday,
“Even though the report cited unnamed government sources, the oil market remains susceptible to any signs of a breakthrough or breakdown in talks ahead of the December 15 deadline for a 15% tariff on roughly $160 billion in Chinese goods,” the ANZ analysts added. “The latest update on China’s pessimism with regards to the trade deal adds to the list of warning signs that the two sides continue to find difficulties in moving ahead with resolving the trade conflict,” IG market strategist Pan Jingyi said.
“With less than a month to go before the December 15 tariffs tranche, it will be in both side’s interest to see a trade deal materialize and this is as manufacturing indicators from both economies continue to reflect the bite from the ongoing tariffs war,” she added. Meanwhile, an expected build in weekly US crude stocks data and an upward revision in the latest US shale output forecast added further pressure to prices, analysts said.
Analysts surveyed Monday by S&P Global Platts expected US crude inventories to have risen by 1.6 million barrels in the week ended November 15 as an increase in demand from refiners was met with record-high production and a boost in imports.