Pessimism about US-China trade talks pushes oil prices down

London — Oil prices weakened on Monday amid pessimism over US-China trade talks and the prospect of slower economic growth globally that could reduce demand for crude.

Brent crude futures were down 21 US cents at $63.25 a barrel by 8.50am GMT. Prices rose 1.6% last week.

US West Texas Intermediate crude was down 7c at $56.13 a barrel. WTI gained 1% last week.

Economic growth in the US slowed less than expected in the second quarter, with a boom in consumer spending strengthening the outlook for oil consumption.

But non-US growth is slowing faster, due partly to the country’s trade war with China over the past year.

“Fragile economic growth caused by the confrontational and protectionist US trade policy is having a profound impact on oil demand and oil demand growth,” PVM analyst Tamas Varga said.

US and Chinese negotiators meet this week for the first time since trade talks broke down in May, but expectations are low after US President Donald Trump said China might not want to sign a trade deal until after the 2020 US election.

“Even though the crude oil supply picture is fundamentally tight … and geopolitical risks front and centre, the market remains extremely bearish around demand risks due to the escalation in protectionist trade policies and the risk of additional punitive tariffs,” said Emily Ashford, director of energy research at Standard Chartered.

Traders and investors are also focused on meetings of major central banks — including the US Federal Reserve, which is expected to lower interest rates.

Crude prices were still supported by supply risk as tensions remain high around the Strait of Hormuz, the world’s most important oil passageway.

Britain warned Iran on Monday that it must follow international rules and release a British-flagged vessel seized in the Gulf earlier in July.

Defying the pressure, Iran’s Revolutionary Guards published new footage of the seizure of the tanker.

US energy companies last week reduced the number of oil rigs operating for a fourth week in a row, putting the rig count down for an eighth consecutive month.

Reuters