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Oil drops by 1 percent on U.S. supply surge, caution after U.S.-China trade talks

Reuters  |  SINGAPORE 

By Gloystein

(Reuters) - fell by more than 1 percent on Thursday on swelling U.S. supply and amid caution after talks between the and finished without any concrete details on a resolution to their trade disputes.

U.S. Intermediate (WTI) were at $51.66 per barrel at 0807 GMT, down 70 cents, or 1.3 percent, from their last settlement.

International Brent crude futures were down 1.2 percent, or 72 cents, at $60.72 per barrel.

Both rose by around 5 percent on the previous day as financial global markets surged on hope that and may soon be able to end their trade dispute, soothing fears of an all-out trade war between the two biggest economies and the risk of damage to global growth.

"The three-day talks between U.S. and Chinese officials played a significant role in calming the markets. There were clear signs of progress in terms of moving towards higher levels of negotiations," said Hussein Sayed, at futures brokerage

Some of the positive feeling ebbed on Thursday because of a lack of a details on the talks despite a warm statement from on the outcome.

"The rally we have witnessed so far in 2019 is nothing to do with fundamentals, the rally is purely based on optimism and hope," said Matt Stanley, a with in

of consultancy in said in a note that dropped "as optimism fuelled by the U.S.-trade talks earlier in the week appeared to have run its course, and official statements after the conclusion of three days of negotiations, while indicating modest progress, lacked details."

Meanwhile, U.S. cut its 2019 by more than 10 percent on Wednesday, pointing to "weakening economic growth expectations" and rising oil supply, especially from the United States, as reasons for their lower price forecast.

now expects Brent to average $61 a barrel this year, down from a previous estimate of $69 a barrel, and U.S. crude to average $54 per barrel, against a prior forecast of $60.

The main source of new supply is the United States, where remained at a record 11.7 million barrels per day (bpd) in the week ended Jan. 4, the (EIA) said on Wednesday.

That has resulted in swelling fuel inventories.

Gasoline stocks rose 8.1 million barrels, to 248.1 million barrels, marking the largest weekly rise since December 2016, the EIA said. Distillate stocks swelled by 10.6 million barrels, to 140.04 million barrels.

Although crude stocks dipped by 1.7 million barrels, to 439.74 million barrels, they remained above their five-year seasonal average of 435 million barrels.

The surge in U.S. crude production runs counter to efforts led by the Organization of the Petroleum Exporting Countries (OPEC) to cut supply aimed at reining an emerging glut.

"Balancing the market would require OPEC discipline to continue well into 2020," said.

(Reporting by Gloystein; Editing by and Tom Hogue)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, January 10 2019. 13:55 IST
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