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Oil Slips as Resumption of Trade Talks Offers Little Optimism

Futures retreated as much as 2.8 percent in New York, following a 4.6 percent decline last week.

Oil Slips as Resumption of Trade Talks Offers Little Optimism
Men roll oil barrels into a store. (Photographer: Taylor Weidman/Bloomberg)

(Bloomberg) -- Oil skidded to its lowest close in two weeks as worries of a stalemate in U.S.-China trade talks fueled concerns about global growth.

Futures fell 0.6 percent in New York, following a 4.6 percent decline last week. U.S. negotiators will resume talks in Beijing this week, but President Donald Trump and Chinese counterpart Xi Jinping have no plans to meet ahead of a March 1 deadline for new tariffs to kick in. The dollar hit its highest value in almost two months amid weakening economic data, undercutting demand for goods like oil that are priced in the U.S. currency.

Oil Slips as Resumption of Trade Talks Offers Little Optimism

West Texas Intermediate has reversed course after the best January gain on record as investors see little progress on the trade war and growth warnings from across the globe. That’s halted the momentum that had come from supply reductions by OPEC and its allies, as well as sanctions on major producers Venezuela and Iran.

“The one thing that hasn’t improved and is now up for speculation is the U.S.-China trade talks," said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. “That’s going to be the rudder of global markets until we have a resolution."

WTI crude for March delivery dropped 31 cents to $52.41 a barrel on the New York Mercantile Exchange, for its lowest since Jan. 28. Brent for April settlement declined 59 cents to $61.51 a barrel on the London-based ICE Futures Europe exchange.

See also: Oil Drillers Boost U.S. Work on Brighter 2019 Crude Outlook

The market is hoping that the world’s two biggest economies can get negotiations back on track, even after Trump said he’s unlikely to meet with Xi before the deadline he set to more than double tariffs on $200 billion of Chinese goods. American Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are heading to Beijing for discussions to resolve the issue.

Oil Slips as Resumption of Trade Talks Offers Little Optimism

Investors are “looking for safety," said Bart Melek, head of global commodity strategy at TD Securities in Toronto. While most don’t see it in crude right now, there are some bullish signs, he said: Venezuela, Canada and U.S. shale are all likely to slow down production due to political or financial obstacles.

“This market will likely improve with nothing so far indicating that demand is crashing," he said.

A slew of reports due this week may provide fresh direction for oil markets. The Energy Information Administration and OPEC will publish data including their market outlooks on Tuesday. The Paris-based International Energy Agency and BP Plc will also put out reports on demand forecasts on Wednesday and Thursday, respectively.

Other oil-market news:
  • Gasoline futures fell 1.9 percent to $1.4192 a gallon.
  • CEOs at BP Plc and Total SA both called current prices comfortable, with BP’s Bob Dudley saying the market “feels balanced." 
  • Venezuela’s oil minister made a surprise appearance at an energy event in India, as the embattled OPEC producer seeks closer ties with major crude customers in the face of crippling U.S. sanctions.

--With assistance from James Thornhill, Sharon Cho, Heesu Lee and Grant Smith.

To contact the reporters on this story: Alex Nussbaum in New York at anussbaum1@bloomberg.net;Michelle Kim in New York at mkim651@bloomberg.net

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Carlos Caminada

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