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Oil slips on uncertainty over US-China trade deal, surging inventories

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By Reuters

TOKYO – Crude oil futures fell on Friday amid lingering uncertainty on whether, and when, the United States and China will agree on a long-awaited deal to end their bitter trade dispute, the gloom compounded by rising crude inventories in the United States.

A pump jack on a lease owned by Parsley Energy operates in the Permian Basin near Midland, Texas US August 23, 2018. (REUTERS FILE PHOTO / Nick Oxford / MANILA BULLETIN)

A pump jack on a lease owned by Parsley Energy operates in the Permian Basin near Midland, Texas US August 23, 2018. (REUTERS FILE PHOTO / Nick Oxford / MANILA BULLETIN)

Brent crude, the global benchmark, was down 16 cents, or 0.3%, at $62.13 a barrel by 0259 GMT, after gaining 0.9% in the previous session.

US West Texas Intermediate (WTI) crude was down 23 cents, or 0.4%, at $56.92 a barrel. The contract rose by 1.4% on Thursday.

The trade war between the world’s two biggest economies has slowed economic growth around the world and prompted analysts to lower forecasts for oil demand, raising concerns that a supply glut could develop in 2020.

On Thursday, the Chinese commerce ministry said the two countries have agreed in the past two weeks to cancel trade tariffs in different phases, without giving a timeline.

But that comment was shrouded in doubt soon after when Reuters reported that the plan faces stiff internal opposition in the US administration.

“Oil is in pause mode as traders await more details on the trade talks,” said Stephen Innes, Asia Pacific market strategist at AxiTrader.

Also concentrating minds among sector watchers were remarks by OPEC Secretary-General Mohammad Barkindo this week that he was more optimistic about the outlook for 2020 because of potentially positive developments on trade disputes, appearing to downplay any need to cut output more deeply.

A deal between the Organization of the Petroleum Exporting Countries (OPEC) and allies, such as Russia, is limiting supplies until March next year. The producers meet on Dec. 5-6 in Vienna to review that policy.

Barkindo’s comments are “spooking the market, especially in the face of the seemingly never-ending run of US inventory builds,” said AxiTrader’s Innes.

US crude oil stockpiles rose sharply last week as refineries cut output and exports dropped, while refined products extended a multi-week drawdown, the Energy Information Administration said on Wednesday.

Stocks at the Cushing, Oklahoma, delivery hub for WTI rose by 1.7 million barrels, the EIA said.

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