Oil eases from two-week high amid supply concerns

WASHINGTON: Oil prices eased on Tuesday from a two-week high, weighed down by concerns about rising supplies, despite earlier optimism over the pause in the US-China trade war after both countries temporarily cut tariffs.

Brent crude futures dropped 22 cents, or 0.3 per cent, to $64.74 per barrel by 0248 GMT. US West Texas Intermediate (WTI) crude fell 18 cents, or 0.3 per cent, to $61.77.

Both benchmarks closed about 1.5 per cent higher on Monday at their steepest settlements since April 28. The gains come during a turbulent time for global oil markets.

The US and China agreed to slash steep tariffs for at least 90 days, sending Wall Street stocks, the US dollar and crude prices sharply higher on Monday.

“While a thawing in trade tensions between China and the US is helpful, there’s still plenty of uncertainty over what happens in 90 days. This uncertainty could continue to generate headwinds for oil demand,” ING analysts said in an email to clients.

But underlying schisms that led to the dispute remain, including the US trade deficit with China and US President Donald Trump’s demand for more action from Beijing to combat the US fentanyl crisis.

Markets were also eyeing rising supplies as a key driver for oil price weakness.

“Though demand has been a key concern for the oil market, supply increases from OPEC+ mean that the oil market will be well supplied through the remainder of the year,” ING analysts said, adding that how well supplied the market is will depend on whether OPEC+ sticks with plans for aggressive supply hikes in May and June.

The Organization of the Petroleum Exporting Countries (OPEC) has boosted oil output by more than previously expected since April, with May output likely up by 411,000 barrels per day.

Meanwhile, on the crude oil inventory front, analyst views were mixed.

A Reuters poll showed US crude oil stocks likely fell last week, but Macquarie energy strategist Walt Chancellor is expecting US crude inventories to rise by 7.6 million barrels.

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