U.S. Treasury Secretary Steven Mnuchin said late on Tuesday that the tariffs would remain even as a trade deal is set to be signed on Wednesday. That could temper China’s oil demand growth by limiting its access to its second-largest trading partner. Chinese demand has been the main driver of global fuel consumption growth.
Concerns about increasing supply also pressured prices after a government report on Tuesday said that output from the U.S., currently the world’s largest producer, will increase in 2020 by more than previously forecast. Additionally an industry report late on Tuesday said U.S. crude inventories increased last week.
U.S. West Texas Intermediate crude futures were down 23 cents, or 0.4%, at $58.00 a barrel.
Brent crude was down 21 cents, or 0.3%, at $64.28 per barrel by 0206 GMT.
“Investors are incredibly concerned about the well documented non-OPEC supplies coming to market in 2020, and those worries came to the fore as oil prices headed lower after a bearish to consensus inventory build was reported,” Stephen Innes, chief Asia market strategist at AxiTrader said in a note.
U.S. President Donald Trump is slated to sign the Phase 1 agreement with Chinese Vice Premier Liu He at the White House on Wednesday. That agreement is expected to include provisions for China to buy up to $50 billion more in U.S. energy supplies.
However, the Treasury Secretary Mnuchin said in a television interview that the U.S. will keep the tariffs until the completion of a second phase of the agreement.
U.S. crude inventories rose by 1.1 million barrels, data from the American Petroleum Institute showed, countering expectations for a draw. Gasoline and distillate inventories also climbed.
U.S. oil production is expected to rise to a record of 13.30 million barrels per day in 2020 mainly driven by higher output in the Permian region of Texas and New Mexico, the U.S. Energy Information Administration (EIA) said.