Oil drops 1pc on concern over US-China trade war

12 November, 2019 12:00 AM printer

TOKYO: Oil prices fell more than 1per cent on Monday amid concerns over the prospects of a trade deal between the United States and China, while worries about oversupply also weighed on the market.

Brent crude was down 69 cents, or 1.1per cent, at US$61.82 by 0730 GMT. The contract rose 1.3per cent last week, report agencies.

U.S. crude was 63 cents, or 1.1per cent, lower at US$56.61 a barrel, having risen 1.9per cent last week.

U.S. President Donald Trump said on Saturday that trade talks with China were moving along “very nicely,” but the United States would only make a deal with Beijing if it was the right one for America.

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.

Trump also said there had been incorrect reporting about U.S. willingness to lift tariffs as part of a “phase one” agreement, news of which had boosted markets.

Underlining the impact of the trade war, data over the weekend showed that China’s producer prices fell the most in more than three years in October, as the manufacturing sector weakened, hit by the dispute and declining demand.

“China delivered a massive deflationary shock in its factories, providing a somber tone towards the fragile state of the global economy,” Samuel Siew, analyst at Phillip Futures, said in a note.

Auto sales in China fell for a 16th consecutive month in October, with the number of new energy vehicles sold contracting for the fourth month in a row, data showed on Monday.

Investors are also concerned about excess supplies of crude, analysts said.

The oil market outlook for next year may have upside potential, OPEC Secretary-General Mohammad Barkindo said last week, suggesting there is no need to cut output further.