Oil prices fell on Thursday, despite U.S. President Donald Trump’s announcement of his intention to reduce tariffs on China following his meeting with Chinese President Xi Jinping in South Korea, as investors expressed skepticism that the move marked a real end to the trade war between the two countries.
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Brent crude futures fell by 20 cents, or 0.31%, to $64.72 a barrel by 06:42 GMT, after rising 52 cents in the previous session. U.S. West Texas Intermediate (WTI) crude also dropped 20 cents, or 0.33%, to $60.28 a barrel, following a 33-cent gain on Wednesday.
Trump agreed to reduce tariffs on China from 57% to 47% for one year, in exchange for Beijing resuming purchases of U.S. soybeans, continuing exports of rare earth elements, and tightening controls on the illicit fentanyl trade.
Vandana Hari, founder of Vanda Insights, a firm specializing in oil market analysis, said:
“The market is seeing things for what they are — stripped of political gloss — it’s nothing more than a temporary truce and a modest easing of tensions, promoted as a ‘trade deal.’”
The U.S. Federal Reserve’s interest rate cut on Wednesday — in line with market expectations — also supported the economic outlook, although the Fed signaled that this may be the final cut of the year, amid the ongoing government shutdown, which threatens the availability of key economic data.
Claudio Galimberti, chief economist at Rystad Energy, wrote in a note:
“The Fed’s decision reflects a broader shift in the monetary policy cycle toward supporting growth and gradually restoring inflation, providing a boost to commodities sensitive to economic activity.”
Despite earlier gains for Brent and WTI crude, supported by a larger-than-expected drop in U.S. oil and fuel inventories, both benchmarks are on track for monthly losses exceeding 3% in October, marking the third consecutive month of declines.
Data from the U.S. Energy Information Administration (EIA) showed that U.S. crude inventories fell by 6.86 million barrels to 416 million barrels in the week ending October 24, compared with analysts’ expectations in a Reuters poll for a much smaller drop of 211,000 barrels.
Investors are now watching the upcoming OPEC+ meeting scheduled for November 2, where the alliance is expected to announce a new output increase of 137,000 barrels per day for December. The group has already raised its production targets by more than 2.7 million barrels per day — about 2.5% of global supply — through a series of monthly increases since April, offsetting nearly half of the 5.85 million barrels per day in cuts agreed upon in previous years.
— Reuters
