LDN - Business

Oil holds around $60 as U.S.-China trade hopes support

[September 13, 2019] By Alex Lawler

LONDON (Reuters) - Oil steadied above $60 a barrel on Friday as hints of progress in the U.S.-China trade dispute balanced concerns about slowing global economies and oil demand.

The world's two largest economies are preparing for new talks aimed at curbing the spat that has lasted for over a year. They have been making conciliatory gestures ahead of the talks, cheering investors.

"Both sides have made further displays of goodwill," said Stephen Brennock of broker PVM. "The upshot is that no further deterioration in the economic environment is expected, hence the downside for oil prices should be limited in the near term."

Benchmark Brent crude <LCOc1> was down 6 cents at $60.32 a barrel by 1152 GMT, while U.S. West Texas Intermediate <CLc1> rose 2 cents to $55.11.

Concern about a weaker demand outlook, leading to potential oversupply, weighed.

OPEC and the International Energy Agency (IEA) issued reports this week pointing to a surplus next year, despite a pact by OPEC and its allies, a producer alliance known as OPEC+, to limit supplies. The deal runs until March.

"In order to avoid a price slide and a massive inventory build, OPEC+ would need to implement further voluntary production cuts," said Eugen Weinberg, analyst at Commerzbank.

"The challenge facing OPEC+ is thus likely to become even bigger next year, maintaining the pressure on the oil price."

[to top of second column]

Oil pump jacks work at sunset near Midland, Texas, U.S., August 21, 2019. REUTERS/Jessica Lutz/File Photo

Brent has traded in a range of nearly $5 this week and is heading for its first weekly loss in five weeks. The U.S. benchmark, similarly volatile, was on track for the first weekly drop in three weeks.

Brent is up 12% in 2019, helped by the deal between the Organization of the Petroleum Exporting Countries and allies including Russia to cut output by 1.2 million barrels per day.

The producers are trying to stop inventories from building up and, in a sign the plan is bearing fruit, U.S. crude stocks fell last week to the lowest in nearly a year.

An OPEC+ monitoring committee met this week and secured pledges from OPEC members Nigeria and Iraq to deliver their share of the cut, something they have failed to do so far, but made no progress on possibly deepening the supply curbs.

Some OPEC delegates say the idea of a larger cut for next year is gaining support. But Saudi Arabia's new energy minister said talks on that issue would be left until the next OPEC+ meeting in December.

(Additional reporting by Aaron Sheldrick; Editing by Edmund Blair and Chizu Nomiyama)

Back to top