Brent tilts into the red, but U.S.-China trade truce limits losses

By Amanda Cooper

LONDON (Reuters) - Brent crude oil declined on Monday, surrendering early gains, though the prospect of an easing in trade tensions between the United States and China helped to stem losses.

Brent crude futures eased by 12 cents to $78.39 a barrel by 1352 GMT, having reached a session high of $79.19. U.S. crude futures were up 30 cents at $71.55.

"Oil prices are finely balanced in today's trading session. Ramping up of oil production in the U.S. and concerns surrounding high oil prices impacting demand are weighing," said Abhishek Kumar, senior analyst at Interfax Energy's Global Gas Analytics.

"Nevertheless, signs of receding trade tensions between the U.S. and China, together with ongoing geopolitical tensions in the Middle East and Venezuela's deteriorating economic scenario, are limiting losses."

A possible U.S. trade war with China is "on hold" after the world's two largest economies agreed to drop their tariff threats while they work on a wider trade agreement, U.S. Treasury Secretary Steven Mnuchin said on Sunday, giving global markets a lift in early Monday trade.

The energy ministers of Saudi Arabia and the United Arab Emirates last week voiced concern about recent oil market volatility and plan to meet Russian counterpart Alexander Novak in St Petersburg to continue consultations.

"It's worth watching St Petersburg at the end of this week. That could provide the key input for the next few weeks," said Petromatrix strategist Olivier Jakob.

BP Chief Executive Bob Dudley told Reuters he expected a flood of U.S. shale and a possible reopening of OPEC taps to cool oil markets after crude rose above $80 a barrel last week.

Dudley said he saw oil prices falling to between $50 and $65 because of surging shale output and OPEC's capacity to boost production to cover a potential shortfall in Iranian supplies owing to U.S. sanctions.

Venezuela's socialist leader Nicolas Maduro faced fresh international censure on Monday after his re-election in a vote that foes denounced as a farce cementing autocracy.

The United States is actively considering oil sanctions on OPEC member Venezuela, where output has dropped by a third in two years to its lowest in decades.

"The spectre of U.S. oil sanctions on the embattled Latin American producer now looms large as Washington strives to tighten the financial noose," PVM Oil Associates strategist Stephen Brennock said in a note.

Fund managers cut their holdings of U.S. crude to the lowest level this year, according to data from the U.S. Commodity Futures Trading Commission on Friday.

(Editing by Dale Hudson and David Goodman)