Oil prices pulled back from their highest levels in nearly two months on Friday amid continued overtainty over whether the United States and China will be able to reach a partial trade deal that would lift some pressure on the global economy.
That was more than enough to offset news of a likely extension of production cuts by major producers that drove prices higher in the previous session.
West Texas Intermediate crude was at $58.20 a barrel, down 38 cents or 0.7%.
Brent crude futures had slid 31 cents, or 0.5%, to $63.66 a barrel.
China has invited top U.S. trade negotiators for a new round of face-to-face talks in Beijing amid continued efforts to strike at least a limited deal, the Wall Street Journal reported on Thursday citing unidentified sources.
“The key factor for the demand outlook for oil is the (U.S.-China) trade negotiation currently going on,” said Michael McCarthy, chief market strategist at CMC Markets and Stockbroking in Sydney.
“With oil near the top of recent trading ranges it’s no surprise to see a bit of selling pressure during the session today.”
Prices had touched their highest since late September on Thursday after Reuters reported that the Organization of the Petroleum Exporting Countries (OPEC) and Russia are likely to extend existing production cuts by another three months to mid-2020 when they meet on Dec. 5.
Oil was also buoyed by comments from China’s commerce ministry on Thursday that it will strive to reach an initial agreement with the United States to end the pair’s long-running trade war, allaying fears that talks might be unravelling. However, the completion of a phase one deal could slide into next year.
News that last week saw the biggest drawdown in three months for U.S. crude stock stockpiles at Cushing, Oklahoma also underpinned prices earlier this week. Cushing is the delivery point for WTI futures.
Elsewhere, traders are also keeping a keen eye on the impact on oil production at OPEC countries Iran and Iraq amid ongoing protests.
Several major economies – the United States, France and Germany – will release manufacturing data later today which could impact the market, McCarthy said.