Oil drops on U.S.-China trade talks, American supply
surge
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[January 10, 2019]
By Noah Browning
LONDON (Reuters) - Oil prices edged down on
Thursday amid a lack of any clear resolution to U.S.-China trade talks
and official data that again indicated vast fuel stocks in the United
States.
U.S. West Texas Intermediate (WTI) crude oil futures <CLc1> were at
$51.89 per barrel at 1200 GMT, down 47 cents, or .9 percent, from their
last settlement.
International Brent crude futures <LCOc1> were down .85 percent, or 52
cents, at $60.92 per barrel.
Both benchmarks rose by around 5 percent the previous day, capping off a
week-long climb that marked oil's longest sustained rise since last
summer.
Global financial markets had surged on hopes that Washington and Beijing
may soon end their dispute and avert an all-out trade war between the
two biggest economies.
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Some of the positive feeling ebbed on Thursday, however, a day after
negotiations wrapped up with mildly positive statements from both sides
but few details.
The U.S. Trade Representative's offices said in a statement on Wednesday
that the two sides discussed "ways to achieve fairness, reciprocity and
balance in trade relations".
China's Commerce Ministry said the talks "established a foundation for
the resolution of each others' concerns".
Vandana Hari of consultancy Vanda Insights in Singapore said oil prices
dropped "as optimism fueled by the U.S.-China trade talks earlier in the
week appeared to have run its course, and official statements after the
conclusion of three days of negotiations, while indicating modest
progress, lacked details".
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![](../images/011019PICS/busine27.jpg)
Oil pumps are seen after sunset outside Vaudoy-en-Brie, near Paris,
France November 14, 2018. REUTERS/Christian Hartmann
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Meanwhile, U.S. bank Morgan Stanley cut its 2019 oil price forecasts by
more than 10 percent on Wednesday, pointing to weakening economic growth
expectations and rising oil supply, especially from the United States.
The bank now expects Brent to average $61 a barrel this year, down from
a previous estimate of $69, and U.S. crude to average $54, against a
prior forecast of $60.
The main source of new supply is the United States, where crude oil
production <C-OUT-T-EIA> remained at a record 11.7 million barrels per
day in the week ended Jan. 4, the Energy Information Administration said
on Wednesday.
That has resulted in swelling fuel inventories.
The surge in U.S. production runs counter to efforts led by the
Organization of the Petroleum Exporting Countries to cut supply and rein
in an emerging glut.
Tamas Varga of PVM Oil Associates warned that recent optimism on hopes
of a trade breakthrough may have been fleeting and high global supply
could bring a downward price turn.
"We believe it is just a question of time that the actual or perceived
supply/demand balance that includes stock level, production data as well
as demand figure, will take over."
(Reporting by Noah Browning; Additional reporting by Henning Gloystein
in Singapore; Editing by Dale Hudson and Alexandra Hudson)
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