Oil drops by 1pc on US supply surge, caution after US-China trade talks

SINGAPORE: Oil prices fell by more than 1 per cent on Thursday on swelling US supply and amid caution after talks between the United States and China finished without any concrete details on a resolution to their trade disputes.
US West Texas Intermediate (WTI) crude oil futures CLc1 were at $51.66 per barrel at 08:07 GMT, down 70 cents, or 1.3 per cent, from their last settlement.
International Brent crude futures LCOc1 were down 1.2 per cent, or 72 cents, at $60.72 per barrel.
Both oil benchmarks rose by around 5 per cent on the previous day as financial global markets surged on hope that Washington and Beijing may soon be able to end their trade dispute, soothing fears of an all-out trade war between the two biggest economies and the risk of damage to global growth.
“The three-day talks between US and Chinese officials played a significant role in calming the markets. There were clear signs of progress in terms of moving towards higher levels of negotiations,” said Hussein Sayed, chief market strategist at futures brokerage FXTM.
Some of the positive feeling ebbed on Thursday because of a lack of a details on the talks despite a warm statement from China on the outcome.
“The rally we have witnessed so far in 2019 is nothing to do with fundamentals, the rally is purely based on optimism and hope,” said Matt Stanley, a fuel broker with Starfuels in Dubai.
Vandana Hari of consultancy Vanda Insights in Singapore said in a note that oil prices dropped “as optimism fuelled by the US-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, US bank Morgan Stanley cut its 2019 oil price forecasts by more than 10 per cent on Wednesday, pointing to “weakening economic growth expectations” and rising oil supply, especially from the United States, as reasons for their lower price forecast.
Morgan Stanley now expects Brent to average $61 a barrel this year, down from a previous estimate of $69 a barrel, and US crude to average $54 per barrel, against a prior forecast of $60. — Reuters