Oil Stalls as U.S. Is Said to Fear China Pushback in Trade Talks
(Bloomberg) -- Oil’s rally stalled after some U.S. officials were said to fear a Chinese pushback in trade negotiations between the world’s two largest energy consumers.
Futures were little changed at the close in New York after erasing earlier gains as new concerns over the trade talks cast a shadow over the outlook for global growth and demand for crude. An American Petroleum Institute report that was said to show U.S. crude stockpiles declined 2.13 million barrels last week wasn’t enough to lift prices much in after-hours trading.
“China has been the real driver behind oil demand globally for the last decade and if that is turned off, it is going to make people very nervous,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.
Oil has gained about 30 percent this year as the Organization of Petroleum Exporting Countries and its allies reduced production to avert a global glut on the back of record-high U.S. output. American sanctions continue to squeeze supplies from Iran and Venezuela. But ongoing trade tensions have so far served to cap rallies.
That was evident Tuesday morning, as oil began the day gaining but failed to break through the $60 mark.
“There was some technical trading, trying to get that push up toward the big round number psychologically at $60, and it failed just short of it,” said John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy.
Read more: Crude Oil’s Unlikely to Get What it Needs to Extend Rally
West Texas Intermediate for April delivery traded at $58.93 a barrel at 4:39 p.m. after settling at $59.03 on the New York Mercantile Exchange. Brent for May settlement gained 7 cents to $67.61 a barrel on the London-based ICE Futures Europe exchange.
Oil prices are still being supported somewhat by news that OPEC and its partners will carry on with supply cuts for the time being.
A committee of the so-called OPEC+ group on Monday recommended canceling a planned ministerial meeting in April, saying it would be too soon to determine whether the output cuts should continue into the second half of the year. The change in timing, which still needs to be agreed by the wider coalition, means the group probably won’t decide on an extension until late June, just days before they expire.
Russian Energy Minister Alexander Novak said current prices are acceptable to both consumers and producers and that it will take a wait-and-see approach on the supply curbs. While there’s general support within OPEC for an extension, with members including Iraq voicing support behind closed doors, Novak remains opposed, said a delegate, who asked not to be named because the talks are private.
The industry-funded API was said to report gasoline supplies fell 2.79 million barrels last week. Nationwide distillate stockpiles and crude storage in Cushing, Oklahoma, also declined. Analysts were expecting government data due Wednesday to show that crude inventories rose by 1.75 million barrels last week, according to the median in a Bloomberg survey.
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