Commodities

Oil prices ease as trade talks drag, China's economy shows weakness

Updated : February 28, 2019 10:47 PM IST

Benchmark Brent oil fell while US crude futures steadied on Thursday as US-China trade tensions persisted, the Chinese and Indian economies showed signs of slowing and news of surging US production undermined OPEC-led output curbs.

Brent was down 43 cents, or 0.7 percent, at $65.96 a barrel by 10:54 a.m. ET (1554 GMT). U.S. West Texas Intermediate (WTI) crude rose 12 cents, or 0.2 percent, to $57.06.

Factory activity in China, the world's biggest oil importer, shrank for a third month in February as export orders fell at the fastest pace since the financial crisis a decade ago.

India's economy lost momentum in the final quarter of 2018, reducing the annual rate of growth to 6.6 percent, the slowest pace in five quarters and much less than expected.

"The energy complex will require major assistance from a renewed up-trend in the equities and/or some sustainable weakening in the US dollar if WTI is able to lift much above the $58 mark," Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

A Reuters survey of 36 economists and analysts indicated growing pessimism about prospects for a significant price rally this year, forecasting Brent would average $66.44 in 2019, slightly lower than the January forecast.

"In the short-term, oil markets are going to be characterised by supply tightness on international markets," said Emirates NBD's Edward Bell. "Over the rest of 2019, though, the rising oil price sits incongruously with slowing economic growth in major markets."

The United States is working to hammer out a detailed trade agreement with China that will include specific structural commitments, US Treasury Secretary Steven Mnuchin told CNBC in an interview from London, citing progress in recent talks and hopes for the weeks ahead.

Earlier, US Trade Representative Robert Lighthizer dampened expectations of a swift resolution to the dispute. He said issues were "too serious" to be resolved merely with promises from Beijing to purchase more U.S. goods.

Crude prices have also been dragged by news that U.S. oil production surged more than 2 million barrels per day (bpd) in the past year to a record 12.1 million bpd.

Prices have been supported since January by supply cuts from the Organization of the Petroleum Exporting Countries and allies such as Russia - a group known as OPEC+. That helped drive down US commercial crude inventories by 8.6 million barrels in the latest week.

"Crude imports into the US fell 1.6 million bpd last week, to a two-decade low," ANZ bank said on Thursday.

Shipments from Saudi Arabia and Venezuela dropped sharply, weekly data showed.

Oil prices ease as trade talks drag, China's economy shows weakness

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