Oil prices slid about 1.0 per cent overnight as the US government’s plans to blacklist more Chinese companies dampened hopes for a trade deal between the two countries, although unrest in Iraq and Ecuador lent some support to crude prices.
Both Brent crude and West Texas Intermediate (WTI) crude had risen by more than 1.0 per cent earlier in the day.
Brent was down 45 US cents, or 0.8 per cent, at $US57.90 a barrel and WTI was down 49 US cents, or 0.9 per cent, at $US52.26.
Investors are treading cautiously before US-China trade talks in Washington DC on Thursday.
Prospects for progress dimmed after US President Donald Trump said a quick trade deal was unlikely.
The US administration is also moving ahead with discussions over possible restrictions on capital flows into China, with a focus on investments by US government pension funds, Bloomberg reported.
“The (energy) complex will be forced to focus more succinctly on global oil demand deterioration as it negotiates through the monthly series of Agency reports the rest of this week,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
“We are not ruling out a quick upward price reversal.”
Oil prices were also pressured by weak economic data after US producer prices fell unexpectedly in September, weighed down by lower costs of goods and services, which could give the Federal Reserve room to cut interest rates again this month.
US stocks tumbled on Tuesday and the pan-European STOXX 600 index snapped a two-day winning streak to lose 1.0 per cent.
The US Energy Information Administration (EIA) on Tuesday cut its 2020 world oil demand growth forecast by 100,000 barrels per day (bpd) to 1.30 million.
International Monetary Fund Managing Director Kristalina Georgieva on Tuesday warned of a risk of complacency among countries.
Without action to resolve trade conflicts and support growth, global economic deceleration could turn into “a more massive slowdown,” she said.
“The market’s focus remains on trade tensions and oil demand concerns, ignoring the elevated geopolitical tensions in the Middle East and lower OPEC production in September,” said UBS oil analyst Giovanni Staunovo.
“Growing recession risks have capped the upside of oil prices.”
Crude inventories in the United States are expected to have grown for a fourth week while distillates and gasoline stocks are likely to have fallen, a Reuters poll showed on Monday.
The EIA also said US crude production is expected to rise by 1.27 million bpd in 2019 to a record 12.26 million bpd, slightly above its previous forecast for a rise of 1.25 million.
However, protests in OPEC members Iraq and Ecuador threatened to disrupt their oil output and supported prices.
In Iraq, protests resumed overnight in Baghdad’s Sadr City district, though much of the country appeared quieter than it has been for a week.
“Unrest in Iraq gained a high profile at the start of October as a result of large protests in Baghdad,” RBC analyst Al Stanton said.
He said potential attacks by Turkey on Kurdish forces in northeast Syria could take place close to the Iraqi border, leading to “a refugee crisis that puts pressures on Kurdistan’s economy” and its oil production.
Turkey’s government said it had completed preparations for a military operation in northeast Syria after the United States began pulling back troops.
Ecuador’s energy ministry said protests against austerity could reduce its oil output by 59,450 bpd.
Saudi Arabian officials reiterated on Tuesday that they were ready to meet global oil needs.
Installations belonging to Saudi Aramco were attacked on September 14, hitting output and triggering a spike in oil prices.