Bearish forecasts of build-up in US crude stockpiles cap gains. PHOTO: REUTERS
LONDON: Oil prices rose on Tuesday after China signalled progress in trade talks with the United States, but gains were capped by bearish forecasts of a build-up in US crude stockpiles.
Brent crude oil was up $0.3 at $59.26 a barrel by 1215 GMT, while US West Texas Intermediate crude was $0.26 higher at $53.57 per barrel.
China and the United States have achieved some progress in their trade talks, Vice Foreign Minister Le Yucheng said on Tuesday, and any problems could be resolved as long as both sides respected each other.
"While the encouraging mood across financial markets will remain stimulated by trade optimism, risk aversion could still make an abrupt return should talks drag on or turn sour," said Lukman Otunuga, analyst at FXTM.
The International Monetary Fund last week forecast that fallout from the US-China trade war and trade disputes across the world would slow global growth in 2019 to 3%, the weakest in a decade.
Lower economic growth typically means reduced demand for commodities such as oil.
Prices were also pressured by forecasts of a build-up in US crude stockpiles. Inventories are expected to have risen for a sixth straight week, while distillates and gasoline stocks likely fell in the week to October 18, a Reuters poll showed.
The poll was conducted ahead of reports from the American Petroleum Institute (API), an industry group, and the Energy Information Administration (EIA), an agency of the US Department of Energy.
"Expectations that the API and EIA will report that US crude oil inventories increased by around 3 million barrels over the last week certainly do not help sentiment," ING analyst Warren Patterson said.
"These more visible stock builds, along with demand concerns continuing to linger, suggest it is becoming increasingly more difficult to see a sustained rally in prices ahead of the OPEC+ meeting in early December."
The Organisation of the Petroleum Exporting Countries (OPEC), Russia and other oil producers, an alliance known as OPEC+, have pledged to cut production by 1.2 million barrels per day (bpd) until March 2020. The producers meet again on December 5-6.
Russian Energy Minister Alexander Novak said US oil production is likely to peak in the next few years as current oil prices are capping the pace of expansion.
The brisk pace of US production, now the world's highest, in the past few years has been a key factor behind the relative weakness in oil prices. Output has slowed recently, however.
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