Oil slides as US rifts inject uncertainty into China talks

Oil prices fell on Friday, weighed down by uncertainty about how close the United States and China are to a trade deal and on rising US crude inventories.

Benchmark Brent crude was down $1.21 at $61.08 a barrel by 1437 GMT, on track to end the week 0.9% lower.

West Texas Intermediate (WTI) crude was down 95 cents at $56.2 a barrel.

The 16-month trade war between the world’s two biggest economies has slowed economic growth around the world and prompted analysts to lower forecasts for oil demand, raising concerns that a supply glut could develop in 2020.

China’s commerce ministry said on Thursday that the two countries had agreed in the past fortnight to cancel trade tariffs in phases, without giving a timeline.

But the comment was soon shrouded in doubt after Reuters reported the plan faced stiff internal opposition in the US administration. US officials have signaled opposing views on the status of talks.

Oil prices have also been under pressure since OPEC Secretary-General Mohammad Barkindo said this week that he was more optimistic about the outlook for 2020, appearing to downplay any need to cut output more deeply.

A deal between the Organization of the Petroleum Exporting Countries (OPEC) and allies, such as Russia, will limit supplies until March next year. The producers meet on December 5-6 in Vienna to review that policy.

“Even if a partial (US-China) agreement is reached, the impetus for demand will not be enough to avoid an oversupply next year, meaning that OPEC will still need to make bigger production cuts,” Commerzbank said in a note.

“However, there are those within OPEC who regard the existing cuts to be sufficient so long as they are consistently applied. This is exerting pressure on prices.”

US crude oil stockpiles rose sharply last week as refineries cut output and exports dropped, the Energy Information Administration said on Wednesday.

Stocks at the Cushing, Oklahoma delivery hub for WTI rose by 1.7 million barrels, the EIA said.

These bearish signals overshadowed Chinese customs data showing the country’s crude imports in October rose 11.5% from a year earlier to a record.

Oil prices were unmoved by reports of Iranian forces shooting down a foreign drone over the port city of Mahshahr.