Oil prices eased on Thursday despite US President Donald Trump saying he would lower tariffs on China after a meeting with President Xi Jinping in South Korea, as there was scepticism it marked an end to the trade war.
Brent crude futures, which had risen 52 cents on Wednesday, fell 20 cents or 0.31 per cent to $64.72 a barrel by 0642 GMT. US West Texas Intermediate crude futures also dropped by 20 cents or 0.33 per cent to $60.28 after climbing 33 cents a day earlier.
Trump agreed to reduce tariffs on China to 47 per cent from 57 per cent in a one-year deal in exchange for Beijing resuming US soybean purchases, keeping rare earths exports flowing and cracking down on the illicit trade of fentanyl.
“The market can now see it for what it is, sans all the build-up and political window-dressing,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.
“It’s nothing more than a pause in fighting and minor de-escalation that was being touted as a ‘trade deal’.”
Also helping lift the economic outlook, the US Federal Reserve lowered interest rates on Wednesday, in line with market expectations. However, it signalled that might be the last cut of the year as the ongoing government shutdown threatens data availability.
“The Fed’s decision underscores a broader turn in its policy cycle – one that favours gradual reflation and support over restraint, providing a tailwind to commodities sensitive to economic activity,” Rystad Energy’s chief economist Claudio Galimberti said in a note.
The gains by Brent and WTI in the previous session also reflected a larger-than-expected drawdown in US crude and fuel inventories.
Both benchmarks are, however, on track for declines of more than 3 per cent in October, which would be their third consecutive month of losses.
US crude inventories dropped by 6.86 million barrels to 416 million barrels in the week ended October 24, the Energy Information Administration said, compared with analysts’ expectations in a Reuters poll for a 211,000-barrel fall.
Another key focal point for investors is an OPEC+ meeting scheduled for November 2, where the alliance will likely announce another 137,000 barrels per day (bpd) supply hike for December.
The group has boosted output targets by a total of more than 2.7 million bpd – or about 2.5 per cent of global supply – in a series of monthly increases since April. That is just under half the 5.85 million bpd cumulative cuts in supply the group had agreed to in preceding years.
