SINGAPORE-Oil prices retreated on Wednesday brought heavily by emerging concern that the ‘phase one’ of the Sino-US trade deal may not promote demands. Such was from the decision of the US to retain rounds of tariffs on Chinese products.
On a statement last Tuesday, US Treasury Secretary Steven Mnuchin said that the imposed tariffs on Chinese products would remain despite the anticipated signing of trade pact on Wednesday. This could potentially challenge China’s oil demand growth by restricting access to its second-largest trading associate. In line, Chinese demand is the primary factor that affects global fuel consumption growth.
Supply upsurge also rattled prices following a government note on Tuesday disclosing that outputs from the United States will advance in 2020 and has the possibility to surpass initial forecast. Moreover, a report disclosed that US crude inventories hiked up last week.
Brent crude LCOc1 declined 21 cents, equivalent to 0.3% at $64.28 a barrel by 0206 GMT. US West Texas Intermediate crude futures CLc1 decreased 23 cents, equivalent to 0.4% at $58.00 per barrel.
“Investors are incredibly concerned about the well documented non-OPEC supplies coming to market in 2020, and those worries came to the fore as oil prices headed lower after a bearish to consensus inventory build was reported,” Stephen Innes of AxiTrader stated in a note.
US President Donald Trump is about to sign the deal with Chinese Vice Premier Liu He at the White House on Wednesday. The pact is expected to incorporate mandates for China to purchase $50 billion more in US energy supplies.
Though this is the case, Mnuchin stated that the US will not pull out on going tariffs until such time that the phase two is accomplished.
US crude inventories advanced by 1.1 million barrels, records from American Petroleum Institute showed. Gasoline and distillate inventories also recorded a well-finished activity.
US oil output is viewed to increase up to 13.30 million barrels per day in 2020 boosted by increased production in Texas and New Mexico, US Energy Information Administration said.
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