Oil prices dropped on Tuesday morning, as market participants become more anxious about the next round of U.S.-China trade talks later this week, after the U.S. blacklisted multiple Chinese firms for human rights violations.
At 11:59 a.m. EDT on Tuesday, WTI Crude was down 0.85 percent at US$52.30 and Brent Crude was trading down 0.72 percent at US$57.93 as the market turned its attention again to signs of flagging economic and oil demand growth. Simmering geopolitical tensions in the Middle East, however, limited losses.
Days before one of the highlights for oil this week—the new round of trade talks between the U.S. and China—the United States placed 28 Chinese entities on a watch list over alleged "human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention, and high-technology surveillance." The Chinese firms dismiss those allegations and some of them told CNBC they were “disappointed” with being put on the list.
"The overriding focus this week will be the resumption of U.S. - China talks on Thursday, not least after China over the weekend signaled a reluctance to agree to a comprehensive trade deal," Ole Hansen,Head of Commodity Strategy at Saxo Bank, said on Monday.
"While growth and demand worries knocked 5.5% off the price last week, traders may be reluctant to drive the price lower at this stage with geo-political risks still elevated," Hansen added, noting the tensions in the Middle East, including Saudi Arabia-Iran, Syria, and protests in OPEC’s second-largest producer Iraq.
Yet, the focus of the market is now firmly on the upcoming trade talks, concerns about demand and economies, and the upcoming U.S. inventory reports by the API and EIA on Tuesday and Wednesday, respectively.
Oil prices were down early on Tuesday even as an S&P Global Platts survey found on Monday that OPEC’s oil production plummeted by the most in 17 years in September as the attacks on critical oil infrastructure in its largest producer Saudi Arabia took 5.7 million bpd offline for weeks.
OPEC and the IEA will release their respective monthly reports later this week, and "The market will likely focus on demand estimates from OPEC and the IEA, to see whether there have been further downward revisions in demand growth," Warren Patterson, ING’s Head of Commodities Strategy and Senior Commodities Strategist Wenyu Yao, said on Tuesday.
By Tsvetana Paraskova for Oilprice.com
