Despite bullish signals from Europe, where fears of an economically damaging no-deal Brexit has receded, oil prices fell on Monday as sliding global demand raises more concerns.
Signs of ample global oil supplies, combined with concerns about economic growth in China, the world’s largest oil importer pressured prices.
Global benchmark Brent crude was down 56 cents at $58.86 a barrel. U.S. West Texas Intermediate crude oil declined 38 cents to $53.40 a barrel, on Monday.
U.S. and Chinese trade negotiators are working on nailing down a Phase 1 trade deal text for their presidents to sign next month, hoping to resolve a trade war that has rumbled on over the last year, slowing global economic growth, a CNBC report said.
But adding to tensions, China is now seeking $2.4 billion in retaliatory sanctions against the United States for non-compliance with a World Trade Organisation’s ruling in a tariffs case dating back to the Obama era.
“A rebound in upside potential looks unlikely at this stage given that bullish catalysts are in short supply,” said Stephen Brennock of oil broker PVM.
“Only a meaningful U.S.-China trade agreement or deeper OPEC cuts will change the negative status quo, neither of which seems to be forthcoming.”
The Organisation of the Petroleum Exporting Countries (OPEC), Russia and other oil producers, an alliance known as OPEC+ agreed in December to cut supply by 1.2 million barrels per day (bpd) from the start of this year.
Russia, the world’s second-largest oil producer, said on Sunday it did not meet its supply reduction commitment in September because of an increase in natural gas condensate output as the country prepared for winter.
Additionally, talks between OPEC members Kuwait and Saudi Arabia to resume oil production from joint fields in the Neutral Zone between the two countries, with a capacity of 500,000 barrels per day, could mean more supply returning to the market.
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While market participants believe OPEC+ could decide to extend output cuts in an upcoming December meeting, economic headwinds are curbing bullish sentiment and fuelling oil demand concerns.
China’s economic growth slowed to 6 per cent year-on-year in the third quarter, its weakest in 27-1/2 years and short of expectations due to soft factory production and continuing trade tensions.
However, 9.4 per cent year-on-year increase in China’s refinery throughput for September signalled that petroleum demand remained robust.
“This level of crude intake would imply that every province had simultaneously processed close-to-record volumes of crude based on their historical regional reporting,” JBC analysts said in a note.
European shares opened slightly higher on Monday and UK government bond yields rose as investors remained hopeful that Britain would be able to avoid a disorderly exit from the European Union.
Analysts have said any British-EU agreement that avoids a no-deal Brexit should boost economic growth and oil demand.
