Oil slips towards $60 on demand worries, despite trade hopes

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Oil slipped to around $60 a barrel on Friday as concern about a slowdown in the global economy and oil demand outweighed hints of progress in the US-China trade dispute.

The Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) both issued reports this week pointing to an oil surplus next year, despite an OPEC-led pact to cut supply that runs until March.

“Oil prices have been slipping in recent days even as stock markets have rallied and inventory data has reported large drawdowns,” said Craig Erlam of OANDA. “The IEA and others continue to downgrade forecasts for demand as global economic growth fears mount.”

Benchmark Brent crude was down 25 cents at $60.13 a barrel by 08:30 GMT, while US West Texas Intermediate was up 5 cents at $55.14.

Hopes of progress in the trade dispute lent support. The world’s two largest economies are preparing for a new round of talks aimed at curbing the prolonged spat and have been making conciliatory gestures, cheering investors.

“A wave of optimism is sweeping across financial markets,” said Lukman Otunuga, analyst at broker FXTM, citing “optimism over a potential breakthrough in the US-China trade saga.”

Brent has traded in a range of nearly $5 this week and is heading for its first weekly loss in five weeks. The US benchmark, similarly volatile, was on track for the first weekly drop in three weeks.

Brent is up 12 percent in 2019, helped by a deal by OPEC and allies including Russia, an alliance known as OPEC+, to cut output by 1.2 million barrels per day.

The producers are trying to stop inventories from building up and, in a sign the plan is bearing fruit, US crude oil stocks fell last week to the lowest in nearly a year.

An OPEC+ monitoring committee met this week and secured pledges from OPEC members Nigeria and Iraq to deliver their share of the cut, something they have failed to do so far, but made no progress on possibly deepening the supply cut.

Some OPEC delegates say the idea of a larger cut for next year is gaining support. But Saudi Arabia’s new energy minister said talks on that issue would be left until the next OPEC+ meeting in December.