Oil turns lower as stock market weakens on trade deal uncertainty

NEW YORK: Oil prices were steady to soft on Tuesday, paring earlier gains along with the stock market lower as China dampened optimism for a trade deal with the United States.

Brent crude was down 3 cents a barrel at $58.67 by 11:44 a.m. EDT (1544 GMT). The global benchmark hit a session high of $59.44.

US West Texas Intermediate crude was up 22 cents at $53.86 a barrel after earlier touching a high of $54.57.

"Oil is following the stock market lower on trade uncertainty," said Phil Flynn, an analyst at Price Futures Group in Chicago.

US President Donald Trump said on Monday that he believed China was sincere about wanting to reach a deal, while Chinese Vice Premier Liu He said China was willing to resolve the dispute through "calm" negotiations.

On Tuesday, however, concerns about trade resurfaced after China's foreign ministry that it had not heard of any recent telephone call between the United States and China on trade, and said it hopes Washington can stop its wrong actions and create conditions for talks.

Crude oil prices have fallen by about 20% from 2019 highs reached in April, partly because of worries that the US-China trade war is hurting the global economy, which could dent demand for oil.

China's Commerce Ministry last week said it would impose additional tariffs of 5% or 10% on 5,078 products originating from the United States, including crude oil, agricultural products and small aircraft.

In retaliation, Trump said he was ordering US companies to look at ways to close operations in China and make products in the United States.

"A relative sense of calm has been restored, but it is simply impossible to know how long it will last," said oil broker PVM's Tamas Varga.

"Any market optimism will only prevail when the ink has dried on a new US-China trade agreement".

The measures are prompting reactions from Chinese companies, with Sinopec seeking a tariff exemption for importing US oil in the coming months, sources told Reuters.

Meanwhile, US crude oil and gasoline inventories were expected to have fallen last week, while distillate stockpiles were seen higher, a Reuters poll showed on Monday.

The expected draw in inventories amid strong refining runs is lending strength to crude prices and putting a floor on any downward movement due to trade tensions, said Bob Yawger, director of energy futures at Mizuho in New York.