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New York — Crude futures settled lower Friday as unease over the status of US-China trade talks dampened the mood at the end of a week that saw prices reach their highest level since September.

ICE Brent January futures settled 58 cents lower day on day at $63.39/b, while the NYMEX January light sweet crude futures contract settled down 81 cents at $57.77/b.

The weekly average settle for both front-month crude contracts was higher than in the week earlier. The ICE Brent futures average settle for the week that ended Friday rose 18 cents to $62.62/b, the highest in eight weeks. The front-month NYMEX light sweet crude futures contract close averaged 9 cents higher at $57.14/b, the prompt-month contract's highest average in 10 weeks.

In refined products, the NYMEX front-month RBOB contract settled 3.01 cents lower Friday at $1.6743/gal while the front-month ULSD contract fell 1.53 cents to $1.9294/gal.

The front-month RBOB contract average settle was $1.6519/gal for the week that ended Friday, compared with $1.6223/gal in the prior week, while the front-month ULSD contract weekly average dropped to $1.9057/gal from $1.9180/gal a week earlier.

NEW CHINA TRADE TARIFFS LOOM

Chinese President Xi Jinping said Friday the country wanted to conclude a phase one trade agreement with the US based on "mutual respect and equality," telling an audience of international visitors the world's second largest economy would "when necessary, fight back" in a trade war that he said had been initiated by the US and was unwanted by China.

However, the US Chamber of Commerce said Friday afternoon the phase one deal might not be consummated prior to December 15, when the next round of tariffs on Chinese goods are scheduled to debut.

Edward Moya, a senior market analyst at OANDA, does not think US President Donald Trump will go ahead with the December 15 tariffs if the phase one deal is not sealed

"I'd be stunned," said Moya, noting the December 15 tariff would "hit the consumer" right before the holidays and right ahead of an election year. "I think he will probably kick the can down the road," Moya added, noting he expected Trump to ease up on the tariff talk.

OPEC+ MEETING APPROACHES

Concerns about trade have largely been outweighed the last two days by supply-side news concerning the commitment by OPEC+, a coalition of OPEC and other oil producers, to production cuts.

Commerzbank analyst Carsten Fritsch noted Thursday's rise in prices was widely attributed to a news agency report that OPEC+ next month will extend its production cuts until mid-2020, with attention focusing on Iraq and Nigeria, two members that have not made any reductions.

"It is a reasonable approach as the second half of the year is usually tighter than the first six months," wrote Tamas Varga, an analyst at PVM Oil Associates. "The extension is probably nothing new and is expected."

Varga said "a disciplined approach" from Iraq and Nigeria could reduce production by a further 300,000-400,000 b/d, which he argued would lead to a balanced market in the first half of 2020 and a possible supply deficit in the following six months.

Fritsch was more circumspect, saying it was "doubtful" that the measures would be sufficient to avoid oversupply between January and June 2020. He pointed to OPEC production of 29.5 million b/d, if Saudi Arabia were to take a larger burden of the cuts, compared with the International Energy Agency's expectation there will only be a call of 28.2 million b/d on the group's production.

"Fatally, this signals to OPEC that its intended measures will in fact be sufficient," Fritsch said. "By early next year at the latest, OPEC, thus, risks being rudely awakened."

Moya expects the production group at the December meeting to maintain the status quo. He believes even if Russia decides to ease up on production cuts, the alliance will stay intact because Saudi Arabia will do what is necessary to balance supply to keep prices healthy to support Saudi Aramco's upcoming initial public offering.

--Janet McGurty, janet.mcgurty@spglobal.com

--William Bland, william.bland@spglobal.com

--Edited by Jim Levesque, jim.levesque@spglobal.com