Oil prices slipped on concerns that the U.S./China Phase 1 trade deal may not provide much of a demand boost because the United States intends to keep tariffs on Chinese goods until a second phase deal, Reuters reported.
Prices were also under pressure from an OPEC report saying the producer group expected lower demand for its oil in 2020 even as global demand rises, as rival producers grab market share and the United States looks set for another output record.
Brent crude was down 17 cents at $64.32 per barrel. U.S. West Texas Intermediate crude futures were down 18 cents at $58.05 a barrel.
U.S. Treasury Secretary Steven Mnuchin said late on Tuesday that tariffs on Chinese goods will remain in place until the completion of a second phase of a U.S.-China trade agreement even though both sides are expected to sign an interim deal later on Wednesday.
“A pickup with global demand for crude may struggle as U.S.-Chinese tensions linger after some hard line stances from the Trump administration,” said Edward Moya, analyst at brokerage OANDA.
“Financial markets are disappointed that the Trump administration ... signalled tariffs will remain in place until after the 2020 U.S. Presidential election, depending on whether China comes through on their promises with the Phase 1 agreement.”
U.S. President Donald Trump is due to sign the Phase 1 agreement with Chinese Vice Premier Liu He at the White House on Wednesday. That agreement is expected to include provisions for China to buy up to $50 billion more in U.S. energy supplies.
U.S. crude inventories rose by 1.1 million barrels, data from the American Petroleum Institute showed, countering expectations for a draw.
The United States, whose output has soared in recent years powered by shale, will see total liquids output exceed a 20 million barrel per day (bpd) milestone for the first time, the Organization of the Petroleum Exporting Countries forecast in its market report.
U.S. liquids output will reach 20.21 million bpd in the fourth quarter of 2020 - almost meeting U.S. demand of 21.34 million bpd, OPEC said.
“The continued accommodative monetary policies, coupled with an improvement in financial markets, could provide further support to ongoing increases in non-OPEC supply,” OPEC said.
OPEC and some non-OPEC allies such as Russia have been curbing production to prevent an oil glut and support oil prices above $60 per barrel. Their current deal expires in March.
“The collaboration between OPEC and non-OPEC producing countries remains essential in maintaining stability in the oil market,” OPEC said.
Reporting by Jessica Jaganathan and Dmitry Zhdannikov; Editing by Jane Merriman and Kirsten Donovan
