Oil fell from its 2019 high of almost $67 a barrel on Tuesday as concerns about the progress of U.S.-China trade talks and slowing economic growth countered lower supplies.
Supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) have helped crude to rise more than 20 percent this year, although demand-side worries remain the main drag on the market.
Brent crude slipped 64 cents to $65.86 a barrel by 1435 GMT, having reached a 2019 high of $66.83 on Monday. U.S. crude was down 26 cents at $55.33.
“The market is slowly regaining its bullish footing, subject to the perception of economic risks tied to U.S.-China trade talks,” said Harry Tchilinguirian, global head of commodity markets strategy at BNP Paribas.
More talks between the United States and China to resolve their trade dispute will take place on Tuesday. Traders said they were cautious on taking large new positions before the outcome of the talks.
“If they falter, we run the risk of sell-offs like we had in December,” Tchilinguirian said.
In a further warning sign about the economic outlook, Europe’s biggest bank HSBC warned it may delay some investments this year as it missed 2018 profit forecasts due to slowing growth in China and Britain.
OPEC last week lowered its forecast for growth in world oil demand in 2019 to 1.24 million barrels per day and some analysts believe it could be weaker still.
“Given a continuously uncertain economic picture, our already relatively bearish outlook for 2019 of below 1 million bpd in global oil demand growth may be subject to further downwards revisions,” analysts at JBC Energy wrote.
To stop a build-up of inventories that could weigh on prices, the group of OPEC and non-OPEC producers known as OPEC+ began a new supply cut of 1.2 million bpd on Jan. 1.
Top crude exporter Saudi Arabia has sharply reduced production and exports to ensure that the deal gets off to a strong start.
In keeping with that aim, the kingdom plans to reduce light crude oil supplies to Asian customers for March, two sources with knowledge of the matter said on Tuesday.
U.S. sanctions against exporters Iran and Venezuela have provided additional support to the market.
Venezuela is a major crude supplier to U.S. refineries. Iran’s exports, while down steeply since the sanctions began in November, have risen in early 2019, according to tanker data and sources.
