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Brent eases as trade talks drag, China's economy shows weakness

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Brent oil fell while US crude futures steadied on Thursday as US-China trade tensions persisted, both Chinese and Indian economies showed signs of slowing and news of surging US production undermined Opec-led output curbs.

[NEW YORK] Brent oil fell while US crude futures steadied on Thursday as US-China trade tensions persisted, both Chinese and Indian economies showed signs of slowing and news of surging US production undermined Opec-led output curbs.

Global benchmark Brent crude futures for April ended the session down 36 cents, or 0.5 per cent, at US$66.03 a barrel. The more active May Brent contract fell 27 cents, or 0.4 per cent, to settled at $66.31.

US West Texas Intermediate (WTI) crude for April delivery rose 28 cents, or 0.5 per cent, to settle at US$57.22.

For February, US crude gained 6.4 per cent while Brent crude rose 6.6 percent. Prices have been buoyed since January by supply cuts from the Organization of the Petroleum Exporting Countries and allies such as Russia - a group known as Opec+.

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Factory activity in China, the world's biggest oil importer, shrank for a third month in February as export orders fell at the fastest pace since the financial crisis a decade ago.

India's economy lost momentum in the final quarter of 2018, reducing the annual rate of growth to 6.6 percent, the slowest pace in five quarters and much less than expected.

"The energy complex will require major assistance from a renewed up-trend in the equities and/or some sustainable weakening in the US dollar if WTI is able to lift much above the US$58 mark," Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

A Reuters survey of 36 economists and analysts indicated growing pessimism about prospects for a significant price rally this year, forecasting Brent would average US$66.44 in 2019, slightly lower than the January forecast.

"In the short-term, oil markets are going to be characterised by supply tightness on international markets," said Emirates NBD's Edward Bell. "Over the rest of 2019, though, the rising oil price sits incongruously with slowing economic growth in major markets."

US President Donald Trump on Thursday warned he could walk away from a trade deal with China if it were not good enough, even as his economic advisers touted "fantastic" progress towards an agreement to end a dispute with the Asian country.

The United States and China have imposed tit-for-tat tariffs on hundreds of billions of dollars worth of each others' goods, roiling financial markets

Crude prices have also been dragged by news that US oil production surged more than 2 million barrels per day (bpd) in the past year to a record 12.1 million bpd last week.

Production in Texas rose by 35,000 bpd in December and in North Dakota by 18,000 bpd, monthly data showed on Thursday.

"You've got a tug of war between the bullish sentiment from Opec+ cuts where they are actually sticking to it versus US shale production," said Darrell Fletcher, senior managing director of commodities at Huntington Bank.

"I do think in the past week or two, the upper hand has gone to the bullish side because of the numbers coming in from the production cuts."

US imports from Saudi Arabia and Venezuela to the US have dropped sharply, helping to draw down US commercial crude inventories by 8.6 million barrels last week, government data showed on Wednesday.

Russian Energy Minister Alexander Novak and his Saudi counterpart Khalid al-Falih discussed in a phone call bilateral cooperation in the energy sphere, Russia's energy ministry said in a statement on Thursday, without elaborating.

The US Energy Department said on Thursday it is offering up to 6 million barrels of sweet crude oil from the national emergency reserve in a sale mandated by previous laws to raise funds to modernize the facility.

REUTERS