Oil prices slipped on Tuesday for a second straight session as the cons of a slowing global demand outlook outweighed the pros of OPEC’s agreement with associated producers at the end of last week to deepen crude output cuts in early 2020.
“The euphoria (on output cuts) was short-lived, with an unexpected fall in exports from China highlighting the impact of the trade conflict,” said ANZ Bank in a note on Tuesday.
Data released on Sunday showed exports from China in November fell 1.1% from a year earlier, confounding expectations for a 1% rise in a Reuters poll.
That weakness came amid fresh fronts in the trade war between Washington and Beijing that has stymied global economic growth coming up fast: Washington’s next round of tariffs against some $156 billion Chinese goods are scheduled to take effect on Dec. 15.
U.S. President Donald Trump does not want to implement the next round of tariffs, U.S. Agriculture Secretary Sonny Perdue said on Monday – but he wants “movement” from China to avoid them.
“With the swathe of new tariffs due to kick in on 15 December, the market is watching negotiations closely,” said ANZ.
Analysts said that, though overshadowed for now, the move by ‘OPEC+’ – the Organization of the Petroleum Exporting Countries (OPEC) and associated producers like Russia – to deepen output cuts from 1.2 million barrels per day (bpd) to 1.7 million bpd would remain a mid-term support factor.
But rising non-OPEC production threatens to counteract efforts to limit global crude supplies.
“Despite the voluntary restraint from OPEC, world oil markets remain well supplied … with non-OPEC output expected to rise by well over 2 million bpd next year, with big increases in the U.S., Brazil, and Norway,” said Henning Gloystein, director of global energy and natural resources at Eurasia Group in a note.
U.S. crude oil output recently hit a record of 13 million bpd and is expected to rise further in 2020.
“Going forward, oil prices are likely to be more data-driven, and move in tandem with demand forecasts,” said Margaret Yang, market analyst at CMC Markets..