Brent eases as trade talks drag on, China’s economy shows weakness

By Devika Krishna Kumar

NEW YORK (Reuters) – Brent crude fell while U.S. crude futures settled on Thursday as U.S.-China trade tensions persisted, with both the Chinese and Indian economies showing signs of slowdown and news of rising US production undermined OPEC-led production cuts.

Global benchmark Brent crude futures for April were down 38 cents, or 0.6 percent, at $66.01 a barrel by 1:18 p.m. EST (1818 GMT) ahead of expiration. The most active May Brent contract was down 27 cents, or 0.4 percent, at $66.31.

U.S. West Texas Intermediate (WTI) crude for April delivery was up 15 cents, or 0.3 percent, at $57.09.

Factory activity in China, the world’s biggest oil importer, fell for a third month in February as export orders fell at the fastest pace since the financial crisis a decade ago.

India’s economy lost momentum in the final quarter of 2018, slowing its annual growth rate to 6.6 percent, the slowest pace in five quarters and much less than expected.

“The energy complex will need major assistance from a renewed uptrend in equities and/or a sustained weakening of the US dollar if WTI is able to rise well above the $58 mark,” said Jim Ritterbusch, president of Ritterbusch and Associates. in a note.

A Reuters poll of 36 economists and analysts indicated growing pessimism about the prospects for a significant price increase this year, forecasting Brent to average $66.44 in 2019, slightly lower than forecast from January.

“In the short term, oil markets will be characterized by tight supply in international markets,” said Edward Bell of Emirates NBD. “However, for the remainder of 2019, oil price growth is incongruously based on slowing economic growth in major markets.”

The United States is working on a detailed trade deal with China that will include specific structural commitments, US Treasury Secretary Steven Mnuchin told CNBC in an interview in London, citing recent progress in talks and hopes for the coming weeks. .

Earlier, US Trade Representative Robert Lighthizer played down expectations of a quick resolution to the dispute. He said the problems were “too serious” to be solved by Beijing’s promises to buy more American goods alone.

Crude oil prices were also dragged down by news that US oil production rose by more than 2 million barrels per day (bpd) over the past year, to a record 12.1 million bpd last week.

Prices have been supported since January by supply cuts from the Organization of the Petroleum Exporting Countries and allies such as Russia – a group known as OPEC+.

“You have a tug of war between the bullish sentiment from the OPEC+ cuts, if they’re actually tied to that, and US shale production,” said Darrell Fletcher, senior managing director for commodities at Huntington Bank.

“I think in the last week or two, the edge has shifted to the bullish side because of the numbers coming in from the production cuts.”

U.S. imports from Saudi Arabia and Venezuela to the U.S. fell sharply, helping to reduce commercial U.S. crude stockpiles by 8.6 million barrels last week, government data showed on Wednesday.

Russian Energy Minister Alexander Novak and his Saudi counterpart Khalid al-Falih discussed bilateral energy cooperation in a phone call, the Russian Energy Ministry said in a statement on Thursday, without giving details.

(For a chart on US oil production and storage levels, click here https://tmsnrt.rs/2VegNR3)

(Reporting by Noah Browning in London; Additional reporting by Henning Gloystein; Editing by Marguerita Choy and David Gregorio)