Oil prices fell on Friday as U.S.-China trade tensions continued to weigh on sentiment despite recent diplomatic progress.
Brent crude was down 90 cents, or 1.5%, at $60.05 a barrel by 1225 GMT. U.S. West Texas Intermediate (WTI) crude was down 72 cents, or 1.3%, at $55.58.
Brent is still set to register its fourth consecutive weekly gain while U.S. crude is on track for a second weekly rise.
Beijing and Washington on Thursday agreed to hold high-level talks in early October. The news cheered investors hoping for an end to a trade war that has brought tit-for-tat tariffs between the world’s two biggest economies, chipping away at economic growth.
The prolonged dispute has had a dampening effect on oil prices, though they have risen over the year thanks partly to production cuts led by the Organization of the Petroleum Exporting Countries and Russia to drain inventories.
However, analysts warn that market fundamentals remain bearish and depend heavily on a resolution to the U.S.-China trade saga.
“If trade tensions escalate further, oil demand growth may soften even more, requiring much lower prices,” UBS oil analyst Giovanni Staunovo said in a note analysing oil market trends for 2020.
“On the other hand, unexpected supply disruptions in the Middle East or a surprise production cut by OPEC and its allies may push oil prices higher.”
U.S. crude and product inventories fell last week, with crude drawing down for a third consecutive week despite a jump in imports, the Energy Information Administration (EIA) said.
Crude stocks dropped 4.8 million barrels, nearly double analyst expectations, to 423 million barrels, their lowest level since October last year.
Oil prices on Thursday soared more than 2% after the EIA report, though they gradually trimmed gains on investor doubts over the chances that the trade talks will yield results.
Economy September 23, 2020