SINGAPORE: Oil prices dropped on Tuesday for a second straight session as the cons of a slowing global demand outlook outweighed the pros of OPEC’s agreement with associated producers at the end of last week to deepen crude output cuts in early 2020.
Brent futures were down 11 cents, or 0.2%, at $64.14 per barrel by 0204 GMT while West Texas Intermediate oil futures were down 7 cents, or 0.1% to $58.95 a barrel. The benchmarks fell 0.2% and 0.3% respectively on Monday.
“The euphoria (on output cuts) was short lived, with an unexpected fall in exports from China highlighting the impact of the trade conflict,“ said ANZ Bank in a note on Tuesday.
Data released on Sunday showed exports from China in November fell 1.1% from a year earlier, confounding expectations for a 1% rise in a Reuters poll.
That weakness came amid with fresh fronts in the trade war between Washington and Beijing that has stymied global economic growth coming up fast: Washington’s next round of tariffs against some $156 billion Chinese goods are scheduled to take effect on Dec. 15.
U.S. President Donald Trump does not want to implement the next round of tariffs, U.S. Agriculture Secretary Sonny Perdue said on Monday - but he wants “movement” from China to avoid them.
“With the swathe of new tariffs due to kick in on 15 December, the market is watching negotiations closely,“ said ANZ.
Analysts said that, though overshadowed for now, the move by ‘OPEC+’ - the Organization of the Petroleum Exporting Countries (OPEC) and associated producers like Russia - to deepen output cuts from 1.2 million barrels per day (bpd) to 1.7 million bpd would remain a mid-term support factor.
“While risks remain into year-end on U.S.-China trade talks, the OPEC decision removes a fundamental uncertainty,“ said Stephen Innes, market strategist at AxiTrader.
“So, prices aren’t about to fall off a cliff anytime soon if OPEC has a say in the matter. -Reuters