London — Crude oil futures continue to hold bearish during mid-day trade in Europe, as macroeconomic risk heightens on the back of developments in the US-China trade talks.
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At 1300 GMT, ICE April Brent crude futures were at $61.74/b, up 11 cents/b from Thursday's settle, while the NYMEX March light sweet crude contract was down 29 cents/b, at $52.35/b.
"The market had a good start to the year, but the rally has stalled," Harry Tchilinguirian, Head of Commodity Strategy at BNP Paribas, said.
"Macro risk has come back in to the market. Although underlying fundamentals are price constructive, at the moment macro risk trumps, it has created the softness in prices between yesterday and today," Tchilinguirian said.
"The US President said he would not meet his Chinese counterpart by the end of month. In doing so, he quashed any hopes that both sides would strike a trade deal before a March 1 deadline," PVM analysts said in their morning report.
"The market was essentially being buffeted by supportive supply moves from OPEC lowering production outputs with Saudi leading by example, while ongoing supply concerns from Venezuela, Libya, and Iran continue," Tchilinguirian said.
The kingdom slashed its output to 10.21 million b/d in January, down almost 400,000 b/d from December's level, according to the latest S&P Global Platts OPEC production survey. Saudi Energy Minister Khalid al-Falih has said February output would go even lower, Platts previously reported.
"But in the long term, sentiment is tied to what will happen in the trade talks between the US and China. Essentially, what has happened between yesterday and today, the odds are now lower on a breakthrough on the back of this news. This has had an impact on both equities and oil risks," Tchilinguirian added.
Meanwhile, the European Commission slashed its Eurozone growth forecasts for this year to 1.3% from a previous estimate of 1.9%, PVM analyst data showed.
"Of course this is an element to the somber mood, all of them add up to a bigger picture, but on global risk appetite we are drawn to the trade talks between the US and China," Tchilinguirian said.
PVM analysts added that if the two countries were to fail to settle their trade differences, it would provide green-light for the US tariffs on Chinese imports to jump from 10% to 25%.
"What is more, conditions are ripe for the introduction of tariffs on additional Chinese goods, and subsequent retaliatory measures from Beijing. Needless to say, this will do no favors to what is a gloomy macroeconomic backdrop and will fuel concerns that global oil demand growth will lag," PVM analysts said.
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