Oil slips toward $61 as U.S. inventories seen rising

[October 29, 2019]  By Alex Lawler

LONDON (Reuters) - Oil slipped toward $61 a barrel on Monday, falling for a second day, pressured by expectations for a rise in U.S. crude inventories and fading optimism over a U.S.-China trade deal.

U.S. crude inventories are expected to have risen by around 700,000 barrels last week, according to a Reuters poll of analysts. [EIA/S] The first of two weekly supply reports, from the American Petroleum Institute, is due at 2030 GMT.

Brent crude <LCOc1> was down 54 cents at $61.03 a barrel at 1000 GMT, having fallen 45 cents on Monday. U.S. West Texas Intermediate <CLc1> crude was down 42 cents to $55.39.

Last week, Brent rose by more than 4%, supported by a drop in U.S. inventories and signs of an easing in the U.S.-China trade dispute. This has been weighing on prices for months because of concern it will hit economic growth and demand.

"(U.S. President Donald) Trump and his team have repeatedly stressed the progress made in recent days and the prospect of it being wrapped up earlier than anticipated, although by now we should take this kind of rhetoric with a pinch of salt," said Craig Erlam, an analyst at broker OANDA.

"Brent found resistance around $62 but that may prove temporary if trade headlines continue to improve and central banks keep slashing interest rates."

The U.S. Federal Reserve is expected to cut rates when it concludes its two-day meeting on Wednesday. Investors will also be watching for any indication that further cuts are likely.

An oil pumpjack is seen in La Canada de Urdaneta, Venezuela October 1, 2019. Picture taken October 1, 2019. REUTERS/Jose Nunez

"A cautious market sentiment remains in place, with optimism from last week's progress on a China-U.S. trade deal ebbing away," said analysts at JBC Energy in a report.

BP Chief Financial Officer Brian Gilvary was cautious on the outlook for prices, telling Reuters on Tuesday Brent was "finely balanced" at around $60 with more downside than upside risk.

He was speaking after BP reported a drop in profit due to lower oil prices.

After the API report, attention will focus on official inventory figures from the Energy Information Administration due on Wednesday.

Brent has gained 14% in 2019, supported by a deal to cut supply by 1.2 million barrels per day between the Organization of the Petroleum Exporting Countries and allies including Russia.

The producers meet on Dec. 5-6 to decide whether to extend or adjust the decision, which runs until March. The prospect they could deepen the supply cut has also supported prices.

(Additional reporting by Aaron Sheldrick; Editing by Mark Potter)

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