Oil prices slumped more than 2.0 per cent overnight on worries that global crude demand could stay under pressure as a lack of details about the first phase of a US-China trade deal dimmed hopes for a quick resolution to the tariff fight.
Brent crude dropped $US1.26, or 2.1 per cent, to $US59.25 a barrel while US West Texas Intermediate (WTI) crude lost $US1.20, or 2.2 per cent, to $US53.50 a barrel.
Late on Friday, the US and China outlined the first stage of a trade deal and suspended this week’s scheduled US tariff hikes.
Brent and WTI rose more than 3.0 per cent last week, their first weekly increase in three, on signs of progress toward a trade deal that would boost crude demand.
But existing tariffs remain in place and officials on both sides said much more work was needed before an accord could be agreed.
The market was reacting to a “less than robust trade agreement with China where we’re still awaiting details,” said Andy Lipow, president of Lipow Oil Association in Houston.
“That is in the face of declining demand growth forecasts for the oil market that we’ve seen come out over the last several months.”
A good portion of the gains last week came after the United States announced on Friday it was deploying more troops to Saudi Arabia and after an Iranian oil tanker was attacked in the Red Sea.
“While the market waits for potential responses from the Iranians, the continued inability of geopolitics to sustain price gains is a testament to the state of concerns over demand,” JBC analysts said in a note.
Oil prices drew support from worries that further escalation along the Syrian and Turkish border could affect output or exports from Iraq.
Syrian government troops entered a town in the country’s northeast on Monday.
Saudi energy minister Prince Abdulaziz bin Salman said oil exporters were showing serious commitment to global output cuts in a deal between OPEC and its allies, a grouping known as OPEC+.
Russian Energy Minister Alexander Novak said there were no talks underway to change the OPEC+ deal.
Kuwait’s oil minister said it was too early to discuss a possible build up in oil inventories in 2020.
Khaled al-Fadhel said a price range of $US50-70 per barrel would be acceptable.
The compliance of OPEC+ producers with the supply-reduction agreement was at more than 200 per cent in September, sources familiar with the matter said.
China showed strong demand for oil, with its September imports rising 10.8 per cent from a year earlier as refiners ramped up output.