SEOUL (Reuters) – Oil prices eased on Thursday on the expectations that the resumption of U.S.-China talks will not end the trade war between the world’s two largest oil consumers, exacerbating anxiety over the global economy and fuel demand.
FILE PHOTO: Pumpjacks are seen against the setting sun at the Daqing oil field in Heilongjiang province, China December 7, 2018. Picture taken December 7, 2018. REUTERS/Stringer
China, the world’s biggest oil importer, has lowered expectations of a deal from the talks on Thursday and Friday to head off U.S. President Donald Trump’s proposed increase to the tariff rate on about $250 billion of Chinese goods to 30% from 25% on Oct. 15 if there are no signs of progress.
The dispute has disrupted global supply chains and slowed growth in the world’s two largest economies, curbing fuel consumption in both.
Global benchmark Brent crude futures LCOc1 fell 9 cents, or 0.2%, to $58.23 a barrel by 0654 GMT. U.S. West Texas Intermediate (WTI) futures CLc1 were down 12 cents, or 0.2%, at $52.47.
Both benchmarks are down more than 20% from April peaks.
The front-month spread between November and December U.S. crude futures CLc1-CLc2 traded at a discount of 2 cents a barrel on Thursday. The spread had slipped into contango – where future prices are higher than nearby prices – on Wednesday for the first time since Sept. 19.
“Should U.S.-China trade negotiations take a turn for the worse, market pessimism will impose sharp negative pressures on oil prices, said Benjamin Lu, commodities analyst at Phillip Futures in Singapore.
Prices were also weighed down by a report of rising stockpiles in the United States, currently the world’s biggest oil producer.
U.S. crude stocks rose by 2.9 million barrels in the week to Oct. 4, the Energy Information Administration (EIA) said on Wednesday, more than double analyst expectations of a 1.4 million barrel increase.
Additionally, the Organization of the Petroleum Exporting Countries (OPEC) quietly adjusted its production pact to allow Nigeria to raise its output, adding more supply.
OPEC member Venezuela will also increase its exports despite U.S. economic sanctions that have curtailed shipments.
Indian refiner Reliance Industries plans to start loading Venezuelan crude after a four-month pause, in a further sign of expanding crude supply to the market.
Reporting by Jane Chung; Editing by Christian Schmollinger and David Goodman