Brent crude oil futures LCOc1 had slipped by two cents to $65.32 a barrel by 0422 GMT, while West Texas Intermediate crude CLc1 was down four cents to $60.17 a barrel.
Under a partial trade agreement announced last week, Washington will reduce some tariffs on Chinese imports in exchange for Chinese purchases of agricultural, manufactured and energy products increasing by about $200 billion (156 billion pounds) over the next two years.
“Oil prices are struggling to extend their gains as investors await further details regarding the U.S.-China ‘Phase One’ trade deal,” said Edward Moya, senior market analyst at OANDA. “Oil should be much higher, but the U.S.-China trade war is far from over.”
The so-called ‘Phase One’ trade deal between both countries has been “absolutely completed”, Larry Kudlow, a top White House adviser said on Monday, adding that U.S. exports to China will double under the agreement.
The agreement is yet to be signed and several Chinese officials told Reuters the wording of the agreement remained a delicate issue, with care was needed to ensure expressions used in text did not re-escalate tensions and deepen differences.
JP Morgan and Goldman Sachs have revised their oil price forecasts for the next year upwards, with an OPEC-led agreement to curb output further dovetailing with the improving trade outlook between the U.S. and China.
Lower supply next year due to a planned cut by the Organization of the Petroleum of Exporting Countries (OPEC) and associated producers like Russia - a grouping known as ‘OPEC+’ - and stronger economic growth expected because of the improved trade outlook between United States and China will combine to tighten the oil supply-demand balance next year, analysts from JP Morgan said.
Oil demand could see further improvements as U.S. President Donald Trump “tries to ... ensure the U.S. growth remains robust before voters turn to the polls in November,” said OANDA’s Moya.
Also supporting prices, a preliminary Reuters poll ahead of reports from the American Petroleum Institute (API) and the Energy Information Administration (EIA) showed expectations that U.S. crude oil inventories likely fell last week.
Still, U.S. oil output from seven major shale formations is expected to rise about 29,000 barrels per day (bpd) in January to a record 9.14 million bpd, the EIA said in a monthly forecast on Monday.
