Oil prices hold ground on hopes of easing US-China tensions

WEB DESK: Oil prices were little changed in early trade on Thursday as investors waited for the outcome of a key meeting between US President Donald Trump and Chinese President Xi Jinping, hoping for signs of progress in easing trade tensions that have clouded the global economic outlook.

Cautious trading ahead of APEC meeting

Brent crude futures slipped just 3 cents to trade at $64.89 a barrel by 0032 GMT, while US West Texas Intermediate (WTI) crude edged down 11 cents to $60.37. Despite the small decline, prices held on to most of the previous session’s gains as traders stayed cautious ahead of the leaders’ meeting in Busan, South Korea, on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit.

Markets are hoping the two sides will agree to tone down their trade dispute, which has weighed on global growth and energy demand. On Wednesday, Trump said he expected to reduce tariffs on Chinese imports in exchange for Beijing’s promise to restrict the flow of precursor chemicals used to make fentanyl, a synthetic opioid that has fuelled a major drug crisis in the US.

Fed rate cut offers limited boost

Adding to the mixed sentiment, the US Federal Reserve lowered interest rates on Wednesday, in line with market expectations. However, policymakers hinted it could be the final rate cut of the year as the ongoing government shutdown continues to disrupt key economic data.

“The Fed’s decision underscores a broader turn in its policy cycle – one that favours gradual reflation and support over restraint, providing a tailwind to commodities sensitive to economic activity,” said Claudio Galimberti, chief economist at Rystad Energy, in a note.

Inventory data supports sentiment

In the previous session, Brent and WTI rose 52 cents and 33 cents, respectively, following optimism about the trade discussions and a larger-than-expected drawdown in US crude and fuel inventories.

According to data from the Energy Information Administration (EIA), US crude stockpiles fell by 6.86 million barrels to 416 million barrels for the week ended October 24, compared with analysts’ forecasts of a modest 211,000-barrel decline.

Analysts said the combination of strong inventory data, a dovish Fed stance, and cautious optimism ahead of the Trump-Xi meeting could keep oil prices supported in the short term, though volatility may return if the talks fail to deliver meaningful progress.