Oil prices dropped on Thursday on surging US output, as markets reacted cautiously to the talks between the US and China which wrapped up without concrete details to end their trade conflict.
By 7:48 am GMT, US Nymex crude futures dropped 1.18% to $51.74 per barrel (pb), while international benchmark Brent futures fell 1.11% to $60.76 pb.
Both contracts climbed by about 5% in the previous session as financial markets worldwide rallied on hopes that the US and China, the world’s two largest oil consumers, may soon reach an agreement to put an end to a bitter trade dispute.
This mollified concerns about an all-out trade war between Washington and Beijing and its potential harm on global growth.
However, by Thursday, hopes ebbed because of a lack of details on the discussions, despite a positive statement from China on the outcome.
Crude prices fell “as optimism fueled by the US-China trade talks earlier in the week appeared to have run its course and official statements after the conclusion of three days of negotiations, while indicating modest progress, lacked details,” Singapore-based consultancy Vanda Insights’ Vandana Hari said in a note.
In the same vein, Morgan Stanley slashed its projections of oil prices by over 10% on Wednesday, citing expectations of a slower economic growth and surging oil supply, especially from the US.
Brent is now set to average $61 pb this year, compared with the previous forecast of $69 pb, while Nymex is expected to reach an average of $54 pb, versus a previous projection of $60 pb, the US bank predicted.
Adding to the downward trend, American fuel stockpiles surged, as the US, where oil production remained at a record 11.7 million barrels per day (bpd) in the week ended 4 January, stood as the main source of new supply.
Gasoline inventories in the US rose 8.1 million barrels to 248.1 million barrels, the biggest weekly build-up since December 2016, while distillate stockpiles climbed by 10.6 million barrels to 140.04 million barrels, the Energy Information Administration (EIA) reported on Wednesday.
Despite crude inventories fell 1.7 million barrels to 439.74 million, they remained above their five-year seasonal average of 435 million.
The surge in US supply counters the supply curbs announced by a producer group, including Russia, led by the Organization of Petroleum Exporting Countries (OPEC).
“Balancing the market would require OPEC discipline to continue well into 2020,” Morgan Stanley said.
This article provided by NewsEdge.