NEW YORK (Reuters) – Oil fell about 2% on Tuesday on concerns about excess global crude supply and limited progress toward resolving a U.S.-China trade dispute that has clouded the outlook for oil demand.
FILE PHOTO: An oil pump is seen just after sunset outside Saint-Fiacre, near Paris, France September 17, 2019. REUTERS/Christian Hartmann/File Photo
Brent crude LCOc1 futures fell $1.08, or 1.7%, to $61.36 a barrel by 11:13 a.m. EST (1613 GMT). U.S. West Texas Intermediate (WTI) crude CLc1 futures fell $1.32, or 2.3%, to $55.73 a barrel.
Brent has rallied about 15% this year, supported by a pact by the Organization of the Petroleum Exporting Countries and its allies, including Russia – a group known as OPEC+ – to cut combined oil output by 1.2 million barrels per day from Jan.1.
Russia is unlikely to agree to deepen cuts in oil output at a meeting with fellow exporters next month, but could commit to extend existing curbs to support Saudi Arabia, three sources said.
OPEC and its allies will consider whether to deepen cuts to crude supply when they next meet in December due to worries about weak demand growth in 2020, sources from the oil-producing club said.
“We expect uneasy talks in December. Russia will not categorically agree to (deepen) cuts in winter,” a source familiar with the matter said.
The news on Russia’s stance sent oil prices lower as investors worried about potential oversupply.
“Moreover, Russia also failed to fulfill its agreed cuts in November so far,” Commerzbank analyst Carsten Fritsch said.
Further weighing on prices, a Chinese government source was quoted by CNBC on Monday as saying there was gloom in Beijing about prospects for a trade deal. The long-running dispute has hit economic growth prospects.
“The less than promising reports coming from China on the trade war may have taken some of the energy out of the rally,” said Craig Erlam, analyst at brokerage OANDA.
“We’re certainly seeing less momentum in the recent rallies.”
Oil prices were also hit by a larger than expected rise in Norwegian oil production and the prospect of a further increase in U.S. crude inventories, suggesting ample supplies.
Norway’s production rose in October to beat the official forecast as output from the Johan Sverdrup field began ahead of schedule. This is the largest field to come on stream in the North Sea – home of the Brent contract – for years.
The average estimate from six analysts polled by Reuters was for U.S. crude inventories to have risen by about 1.1 million barrels last week, representing a fourth consecutive weekly gain.
The American Petroleum Institute releases its supply report at 4:30 p.m. EST (2130 GMT) on Tuesday and the government’s official figures are due on Wednesday.
Oil found some support from tension in the Middle East, home to top exporter Saudi Arabia and other core OPEC members. Protesters in Iraq blocked a commodities port on Tuesday.
Additional reporting by Alex Lawler in London and Seng Li Peng in Singapore; Editing by Marguerita Choy and Dale Hudson