Oil Futures Extend Losses

WASHINGTON (DTN) -- New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange settled lower Monday, with both West Texas Intermediate and Brent shedding more than 2% amid growing concerns China would renege on a partial trade agreement reached last Friday. These concerns undermined bullish sentiment that had helped lift oil markets at the end of last week.

A stronger U.S. dollar, which pared a gain to a 98.265 intraday high to settle up 0.17% at 98.17, also weighed on the U.S. crude contract.

NYMEX November WTI futures gave back $1.11 to settle at $53.59 bbl (barrel) and the ICE December Brent contract fell $1.16 to $59.35 bbl. NYMEX November ULSD futures were down 4.25 cents at $1.9151 gallon and the November RBOB contract tumbled 2.56 cents to $1.6132 gallon.

Oil futures gave up most of their gains from last week, as China seemed to further distance itself from a trade agreement announced Friday. Beijing has reportedly asked for more talks with the United States before signing "phase one" of a trade deal, spurring concern that both countries would not resolve their disagreements that have weighed on global economic growth for over a year.

According to wire services, the United States and China emerged from last week's talks with different views on provisions for the trade deal and how close they are to signing a document. U.S. President Donald Trump asserted both sides reached a "very substantial phase one deal" to resolve the ongoing trade war. "Phase two will start almost immediately following the signing of the first phase," he stated.

In contrast, China's Ministry of Commerce merely said, "the two sides have made substantial progress" and "agreed to work together in the direction of a final agreement." China's state-run Xinhua news agency didn't mention a trade deal was reached.

Apart from reports of China' backpedaling, markets grew increasingly concerned about the deal that doesn't address many tough issues between the two countries, including U.S. access to Chinese markets and China's enforcement of intellectual property law. Additionally, a partial trade deal would leave in place current tariffs on $360 billion worth of Chinese imports.

Markets also remain uncertain over an alleged attack on an Iranian oil tanker last week, as there is still no claim of responsibility for the incident and it has yet to be independently confirmed. Saudi Minister of State for Foreign Affairs Adel Al-Jubeir said Sunday the kingdom was not involved in the alleged attack. Meanwhile, Russian President Vladimir Putin is vising Saudi Arabia on Monday, where he was discussing oil markets with Saudi King Salman and Crown Prince Mohammed bin Salman.

"A substantial exchange of opinions took place, on regional problems, on situation at the energy markets, or on oil prices, to keep it simple," Kremlin's spokesperson told reporters in Riyadh during Putin's first visit to Saudi Arabia in over a decade.

According to reports, the Russian president also discussed the future of the OPEC+ alliance. Russia and Saudi Arabia are expected to finalize a number of energy-related business and investment agreements during his visit.

Liubov Georges can be reached at liubov.georges@dtn.com

(BAS)