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Oil Ends Near Flat; Trade War Trumps Kurdish Conflict

Investing.com – Trade uncertainties and geopolitical tensions continue to push and pull the oil market, limiting whichever direction it goes. Crude prices settled near flat Monday as continued worries about the U.S.-China trade war offset initial highs reached by the market on a U.S. decision to stop protecting Kurdish rebels in Syria.

U.S. West Texas Intermediate crude settled down 6 cents, or 0.9%, at $52.75 per barrel, after earlier reaching $54.05, its highest since Thursday.

U.K. Brent oil settled down 2 cents at $58.35.


“There are reports that the U.S.-China trade deal talks will be scaled down as the Chinese seem to not want to make any commitments as the Democrats continue to work towards impeachment,” Price Futures Group energy analyst Phil Flynn wrote in his daily commentary.

“There are reports that the U.S.-China trade deal talks will be scaled down as the Chinese seem to not want to make any commitments as the Democrats continue to work towards impeachment,” Price Futures Group energy analyst Phil Flynn wrote in his daily commentary, referring to the action in the U.S. Congress against President Donald Trump.

Oil, along with stocks on Wall Street, also appeared to take their cue from a tweet by Fox Business correspondent Edward Lawrence who said the Chinese had no intent in compromising on laws related to intellectual property.

“The Chinese Commerce Ministry says what is not in the table and never will be is changes to their laws to protect intellectual property,” Lawrence tweeted. “The Commerce Ministry telling us that the Chinese will deal with intellectual property theft through administrative regulations.”

White House economic adviser Larry Kudlow, meanwhile, told a separate Fox Business briefing that Chinese actions ahead of the trade talks, which included purchase of U.S. commodities, has been encouraging. He said the Trump administration remained optimistic of striking a deal at the talks that are resuming after being stalled in May.

“I’m hopeful,” said Kudlow. “The president has said he wants a deal, but it’s got to be the right deal for America.”

In an unrelated development, U.S.-North Korea nuclear talks that resumed at the weekend after a lengthy break broke down due to what media reports described as irreconcilable differences.

Trump warned in a tweet Monday about severe economic consequences for Turkey if the country does anything “off limits” following the White House’s announcement of U.S. troop withdrawal from Syria. His decision on the troop withdrawal sent crude prices to session highs.

The rebound in oil prices has been capped by lingering fears for the strength of the world economy after a raft of bleak data from the U.S. and global manufacturing sectors last week. The monthly U.S. labor market report reassured market participants somewhat that demand wasn’t falling off a cliff, but all the same, hedge funds cut their net long positions in crude to the lowest level in four weeks, according to data released on Friday by the Commodity Futures Trading Commission.

“Markets are projecting fear that global economic links are heading for a cardiac arrest triggering a global recession,” said Lena Komileva, managing director of (g+)economics in London.

Both OPEC and the International Energy Agency have been steadily revising down their forecasts for oil demand growth since the summer, with the IEA’s most recent report warning that OPEC will have a tough time keeping the market in balance next year, given the prospects for steady growth in supply outside of the cartel.

Earlier Monday, Equinor announced the first production from the giant new Norwegian field Johan Sverdrup two months ahead of schedule. Output from that field is due to ramp up to 440,000 barrels a day by next summer. And elsewhere, a study by Wood Mackenzie concluded that Exxon Mobil (NYSE:XOM) is well on track to hit its target of 1 million barrels a day of crude from the Permian shale basin by 2024.

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