Oil prices climbed on Tuesday, buoyed by hopes for progress in U.S.-China trade negotiations, but gains were held in check amid expectations for another build in U.S. crude stockpiles.
U.S. West Texas Intermediate crude was up 21 cents at $53.72 per barrel by 07:54 AM ET (11:55 GMT), while international benchmark Brent crude was up 21 cents at $59.16 a barrel.
Hopes the U.S. and China were making progress to resolve their trade dispute underpinned gains in oil prices.
The remarks followed comments from U.S. President Donald Trump, who said work toward ending the trade dispute was going well, while White House adviser Larry Kudlow said tariffs scheduled for December could be withdrawn if progress was made.
“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, an 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.
Lower economic growth typically means reduced demand for commodities such as oil.
But price gains were capped by expectations for a buildup in U.S. crude stockpiles ahead of reports from the American Petroleum Institute, an industry group, later in the trading data and the weekly report from the Energy Information Administration on Wednesday.
“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.
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.
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