Abu Dhabi, UAESunday 31 May 2020

Oil extends losses after Trump's criticism dampens trade talk hopes

Prices fell for a second day, dragged down by escalating US-China trade war and its impact on crude demand

Oil prices fell for a second day on Wednesday. Reuters
Oil prices fell for a second day on Wednesday. Reuters

Oil prices fell on Wednesday for a second day on worries that fuel demand could fall after US President Donald Trump doused recent optimism over China-US trade talks and reignited concerns about global economic growth.

Brent crude futures fell 1.24 per cents lower at $62.21 per barrel at 11.45am UAE time, while US West Texas Intermediate crude dropped to $56.36, down 1.3 per cent.

Both benchmarks have fallen to their lowest level since before the attack on Saudi Arabian oil facilities on September 14.

"What really pulled the rug from underneath oil was Donald Trump's comments on trade last night," said Jeffrey Halley, senior market analyst for Asia Pacific at OANDA.

Mr Trump criticised China's trade practices at the United National General Assembly on Tuesday and said he would not accept a "bad deal" in US-China trade negotiations.

China is the world's largest oil importer and second-largest crude user. The US is the largest consumer of oil.

Mr Trump also said he saw a path to peace with Iran even as he denounced Iran for "bloodlust", cooling other risk premiums built into oil prices.

Oil rallied last week following attacks on Saudi Arabia's oil installations that disrupted supplies from the world's top exporter. To meet its supply obligations to Saudi refineries overseas, Saudi Aramco is buying oil from other Middle East producers.

"Right now, the market is very concerned about the demand side of the equation, but I would caution against being complacent about what's happening in the Middle East," said Howie Lee, an OCBC economist.

Saudi's crude oil stockpiles could run out within two months, and that could prompt buyers to look for supplies in the spot market and push prices higher again, Lee said.

Prices were also weighed down by an unexpected build in US crude inventories last week.

US crude inventories rose 1.4 million barrels last week, the American Petroleum Institute said on Tuesday, compared with analysts' forecasts of a 200,000-barrel drawdown.

Official government data from the US Energy Information Administration will be released later today.

Updated: September 25, 2019 01:15 PM

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