Futures Movers: Oil lower as traders await U.S.-China trade talks

Oil futures headed lower Tuesday as traders kept tabs on developments ahead of U.S.-China trade talks due later this week, which could shape expectations around demand for crude.

“The rising tensions between the U.S. and China over the last 24 hours has resulted in a broad risk-off move,” said Tyler Richey, co-editor at Sevens Report Research. “Oil is being dragged down with stocks and other assets sensitive to global growth expectations, which continue to fall under pressure.”

West Texas Intermediate crude for November delivery CLX19, -0.68% lost 12 cents, or 0.2%, to end at $52.63 a barrel on the New York Mercantile Exchange. December Brent crude BRNZ19, -0.34% settled 11 cents lower, down 0.2%, at $58.24 a barrel on ICE Futures Europe.

The U.S. late Monday blacklisted 28 Chinese companies due to their alleged role in human-rights violations against Muslim minorities. The move, ahead of high-level discussions between U.S. and Chinese officials on Thursday and Friday, damped enthusiasm over prospects for a breakthrough in the long-running trade dispute, weighing on stocks.

Early Tuesday, Bloomberg reported that the Trump administration was moving ahead with discussions around possible restrictions on capital flows into China, particularly investments made by U.S. government pension funds.

“As we continue through the week, sentiment towards the trade war will remain critical for the oil market, especially with WTI prices testing key technical support near $52/barrel,” Richey told MarketWatch. “Bottom line, bad news on trade this week would likely see WTI breakdown through the summer lows and retest last December’s lows in the low to mid $40/barrel range.”

In a monthly report issued Tuesday, the U.S. Energy Information Administration cut its expectations for global oil demand growth and lowered 2020 price forecasts on West Texas Intermediate and Brent crude oil prices.

The EIA also said it expects U.S. winter heating bills to be lower than last year’s.

On Wednesday, the oil market will get an update on weekly U.S. petroleum supplies from the EIA. Trade group the American Petroleum Institute will issue its own figures late Tuesday.

Crude stockpiles are expected post a rise of 2.4 million barrels for the week ended Oct. 4, according to analysts polled by S&P Global Platts. The survey also showed expectations for supply declines of 1.2 million barrels for gasoline and 2.5 million barrels for distillates, which include heating oil.

Back on Nymex, November gasoline RBX19, +0.43% rose 1.15 cents, or 0.7%, to close at $1.5809 a gallon, while November heating oil HOX19, -0.09% ended 0.68 cent higher, up 0.4%, at $1.9101 a gallon.

November natural-gas futures NGX19, -0.65% fell 1.5 cents, or 0.7%, to finish at $2.288 per million British thermal units.