Oil Steady as Inventory Drop vies with Trade Concerns
Oil prices fell on Wednesday as worries over a possible delay in resolving the U.S.-China trade war which has hurt global oil demand competed with a drop in U.S. crude inventories which buoyed prices.
Brent crude was up 4 cents, or 0.06%, at $61.63 a barrel by 0906 GMT. U.S. West Texas Intermediate (WTI) crude was down 8 cents, or 0.14%, at $55.46 a barrel.
The United States and China were continuing to work on an interim trade agreement, but it may not be completed in time for U.S. and Chinese leaders to sign it next month, a U.S. administration official said.
The latest potential setback in the negotiations stalled a rally in global share markets.
"Selling came courtesy of the fading optimism over trade and a Fed rate cut. Risk assets were dealt a blow as market players worried that the US and China would delay settling their trade differences," said PVM analyst Stephen Brennock.
However, U.S. crude inventories fell 708,000 barrels in the week ended Oct. 25 to 436 million, compared with analysts' expectations for an increase of 494,000 barrels, according to data from the industry group, the American Petroleum Institute.
Investors are also awaiting the outcome of the Federal Reserve's two-day policy meeting this week. The Fed looks set later on Wednesday to nudge along a U.S. economy that is being hampered by slowing investment and weak growth overseas. It would be the third cut this year.
A rate cut would help support oil prices as a stronger economy typically implies higher demand for crude, while falling inventories suggest the market is coming into balance.
Russia's deputy energy minister also said on Tuesday it was too early to talk of deeper output cuts by OPEC and its allies, adding to the pressure on the market.
The Organization of the Petroleum Exporting Countries and other producers including Russia - a grouping referred to as OPEC+ - have cut oil output by 1.2 million barrels per day to support prices since January.
In the United States, gasoline stocks dropped by 4.7 million barrels, compared with analyst expectations for a drop of 2.2 million barrels, and distillate stocks were down by 1.6 million barrels, versus an expected fall of 2.35 million barrels.
Still, crude stocks at the Cushing, Oklahoma, delivery hub for WTI rose by 1.2 million barrels, the API said.
The Energy Information Agency (EIA) is set to issue its weekly report at 10:30 a.m. EDT on Wednesday.
By Noah Browning