By Elizabeth Low and Grant Smith

Oct 14, 2019

(Bloomberg) Oil slid after surging the most in almost a month on Friday amid doubts that recent progress in the U.S.-China trade talks will compensate for a worsening global demand outlook.Futures in New York fell as much as 1.4% after gaining 2.2% in the previous session. Washington and Beijing made several concessions to reach a partial trade deal last week, and are aiming for a more comprehensive agreement before the end of the year. Prices gained on Friday as an attack on an Iranian crude tanker in the Red Sea stoked tension in the Middle East.

More traders took short positions on oil, eroding prices

Despite positive momentum in the trade negotiations, and an array of threats to oil supply in recent months including an attack on Saudi Arabia’s oil facilities, unrest in Iraq and Ecuador and the economic unraveling of Venezuela, traders continue to fret that faltering consumption and robust U.S. crude production will lead to a global surplus next year. Hedge fund bets that West Texas Intermediate futures will decline have more than doubled in the last three weeks.

“The oil market verdict continues to be bearish, both for the nearest months and for next year,” said Bjarne Schieldrop, Oslo-based chief commodities analyst at SEB AB. “The concerns over the attacks on the Iranian oil tanker last week are evaporating and the optimism over the U.S.-China trade deal is fading.”

WTI for November delivery dropped 50 cents, or 0.9%, to $54.19 a barrel on the New York Mercantile Exchange as of 10:19 a.m. in London. It advanced $1.15 on Friday, the most since Sept. 16, capping a weekly gain of 3.6%.

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Brent crude for December settlement fell 58 cents, or 1%, to $59.93 a barrel on the ICE Futures Europe Exchange after climbing 2.4% on Friday. The global benchmark traded at a premium of $5.65 to WTI for the same month.

“Macro sentiment will be decisive for the oil price in the very short term,” said Helge Andre Martinsen, senior oil market analyst at DNB Bank ASA. “Still, we believe the tight physical crude market eventually will push oil prices higher. We expect to see continued inventory decline into year end, the refinery margins are good, and we expect a significant ramp up of refinery runs in the weeks ahead.”

Other oil-market news
Saudi Aramco showed it has made significant progress in restoring damaged oil infrastructure just a month after a devastating aerial attack halted production, but work remains to be done. Aramco said it’s restored most of its oil output capacity and is currently pumping 9.9 million barrels a day, the same as before the Sept. 14 attacks. Daily rates for very large crude carriers on the Persian Gulf to China route soared to $300,391 a day following the attack on the Iranian tanker and U.S. sanctions on several shipping companies from around $25,000 a month ago, Baltic Exchange data show. China’s first-ever tariffs on U.S. oil imports fell short of stopping six supertankers from discharging shipments at ports in the world’s biggest crude consumer.

Other oil-market news

Saudi Aramco showed it has made significant progress in restoring damaged oil infrastructure just a month after a devastating aerial attack halted production, but work remains to be done. Aramco said it’s restored most of its oil output capacity and is currently pumping 9.9 million barrels a day, the same as before the Sept. 14 attacks.
Daily rates for very large crude carriers on the Persian Gulf to China route soared to $300,391 a day following the attack on the Iranian tanker and U.S. sanctions on several shipping companies from around $25,000 a month ago, Baltic Exchange data show.
China’s first-ever tariffs on U.S. oil imports fell short of stopping six supertankers from discharging shipments at ports in the world’s biggest crude consumer.