SINGAPORE: Oil prices edged lower on Thursday as fresh tensions between the United States and China over ongoing protests in Hong Kong fuelled concern that a long hoped-for deal to end a trade war between the world’s top two economies may be further delayed.
Trade experts have warned the first phase of a deal could slide into next year, while markets are wary negotiations might take a hit as the US House of Representatives passed two bills to back protesters in Hong Kong, much to the disapproval of China.
Brent crude futures LCOc1 dipped 22 cents, or 0.35 per cent, to $62.18 a barrel by 06:11 GMT, while West Texas Intermediate (WTI) crude futures CLc1 fell 20 cents, or 0.35 per cent, to $56.81 per barrel. Both benchmarks had risen strongly on Wednesday on bullish US crude inventory data.
“Overnight we saw a rebound of about 3 per cent in crude futures after a reduction in US inventories,” said Hue Frame, portfolio manager at Frame Funds in Sydney. “The volatility today can be attributed to concerns surrounding the ‘phase one’ of the US-China trade deal being delayed into 2020.”
The trade war has hit global growth prospects and dominated the outlook for future oil demand, and US President Donald Trump has said he is inclined to raise tariffs on Chinese imports if a trade deal is not reached.
“Market participants ... hope that the slowdown in global growth will subside if a deal is struck,” said portfolio manager Frame. “If (the deal is) delayed, they would more than likely sell off crude with the expectation that global demand for oil will decline during 2020 and beyond.” The subdued mood took over from optimism after US crude stocks rose by a less-than-expected 1.4 million barrels in the week to Nov. 15, data from the Energy Information Administration showed. — Reuters
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