Oil rises on optimism about prospects for a U.S.-China
deal
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[October 22, 2019] By
Bozorgmehr Sharafedin
LONDON (Reuters) - Oil prices rose on
Tuesday after China signaled progress in trade talks with the United
States, but gains were capped by bearish forecasts of a buildup in U.S.
crude stockpiles.
Brent crude oil <LCOc1> was up 31 cents at $59.27 a barrel by 1021 GMT,
while U.S. West Texas Intermediate crude <CLc1> was 16 cents higher at
$53.47 per barrel.
China and the United States have achieved some progress in their trade
talks, Vice Foreign Minister Le Yucheng said on Tuesday, and any problem
could be resolved as long as both sides respected each other.
"While the encouraging mood across financial markets will remain
stimulated by trade optimism, risk aversion could still make an abrupt
return should talks drag on or turn sour," said Lukman Otunuga, analyst
at FXTM.
The International Monetary Fund last week forecast that fallout from the
U.S.-China trade war and trade disputes across the world would slow
global growth in 2019 to 3.0%, the weakest in a decade.
(Graphic: PMI,
https://fingfx.thomsonreuters.com/
gfx/ce/7/7021/7003/PMI.jpg)
Lower economic growth typically means reduced demand for commodities
such as oil.
Oil prices however were pressured by forecasts of a buildup in U.S.
crude stockpiles. Inventories are expected to have risen for a sixth
straight week, while distillates and gasoline stocks likely fell in the
week to Oct. 18, a Reuters poll showed.
The poll was conducted ahead of reports from the American Petroleum
Institute (API), an industry group, and the Energy Information
Administration (EIA), an agency of the U.S. Department of Energy.
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Oil rigs are seen at Vaca Muerta shale oil and gas drilling, in the
Patagonian province of Neuquen, Argentina January 21, 2019.
REUTERS/Agustin Marcarian
"Expectations that the API and EIA will report that U.S. crude oil inventories
increased by around 3 million barrels over the last week certainly do not help
sentiment," ING analyst Warren Patterson said.
"These more visible stock builds, along with demand concerns continuing to
linger, suggest it is becoming increasingly more difficult to see a sustained
rally in prices ahead of the OPEC+ meeting in early December."
The Organization of the Petroleum Exporting Countries, Russia and other oil
producers, an alliance known as OPEC+, have pledged to cut production by 1.2
million barrels per day (bpd) until March 2020. The producers meet again on Dec.
5-6.
Russian Energy Minister Alexander Novak said U.S. oil production is likely to
peak in the next few years as current oil prices are capping the pace of
expansion.
Goldman Sachs has wound back its forecast for growth in U.S. shale oil output in
2020, and slightly reduced its outlook for 2020 global oil demand growth.
(Reporting by Bozorgmehr Sharafedin, additional reporting by Jane Chung in
Seoul; Editing by Dale Hudson and Jan Harvey)
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