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Oil drops as trade war fears, lower demand hit prices
OIL prices slipped on Tuesday for a second straight session as the cons of a slowing global demand outlook outweighed the pros of Opec's agreement with associated producers at the end of last week to deepen crude output cuts in early-2020.
Brent futures were down 11 cents or 0.2 per cent at US$64.14 per barrel by 0738 GMT. West Texas Intermediate oil futures were 10 cents or 0.2 per cent lower at US$58.92 a barrel. The benchmarks fell 0.2 per cent and 0.3 per cent respectively on Monday.
"The euphoria (on output cuts) was short-lived, with an unexpected fall in exports from China highlighting the impact of the trade conflict," said ANZ Bank in a note on Tuesday. Data released on Sunday showed exports from China in November fell 1.1 per cent from a year earlier, confounding expectations for a 1 per cent rise in a Reuters poll.
That weakness came amid fresh fronts in the trade war between Washington and Beijing that has stymied global economic growth coming up fast - Washington's next round of tariffs against some US$156 billion worth of Chinese goods is scheduled to take effect on Dec 15.
US President Donald Trump does not want to implement the next round of tariffs, Agriculture Secretary Sonny Perdue said on Monday - but he wants "movement" from China to avoid them.
"With the swathe of new tariffs due to kick in on Dec 15, the market is watching negotiations closely," said ANZ.
Analysts said that, though overshadowed for now, the move by "Opec+" - the Organization of the Petroleum Exporting Countries and associated producers like Russia - to deepen output cuts from 1.2 million barrels per day (bpd) to 1.7 million bpd would remain a mid-term support factor.
But rising non-Opec production threatens to counteract efforts to limit global crude supplies.
"Despite the voluntary restraint from Opec, world oil markets remain well supplied ... with non-Opec output expected to rise by well over two million bpd next year, with big increases in the US, Brazil and Norway," said Henning Gloystein, director of global energy and natural resources at Eurasia Group in a note.
Since the start of 2017, when Opec and its allies began capping supply, US crude production C-OUT-T-EIA has soared from about 8.8 million bpd to a record 13 million bpd recently, and is expected to rise further in 2020. REUTERS