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Brent falls as demand concerns weigh, US oil prices hit 2019 high

FILE PHOTO: An oil pump is seen in Velma, Oklahoma, U.S., April 7, 2016. REUTERS/Luc Cohen

By Laila Kearney

NEW YORK (Reuters) – Oil prices were mixed on Tuesday as worries about global crude demand and uncertainty over the latest round of U.S.-China trade talks countered investor optimism about tightening supplies.

Brent crude fell 5 cents to settle at $66.45 a barrel, off a 2019 high of $66.83 hit on Monday. U.S. crude rose 50 cents to $56.09 a barrel, its highest level since November 2018.

Washington’s sanctions on oil from Venezuela, a top supplier of sour crude to the United States, helped support U.S. futures prices, said Phil Flynn, an analyst at Price Futures Group in Chicago.

“Some of those sour notes are lifting WTI … That seems to be the near-term situation,” Flynn said.

In the big picture, “I think the market is looking for an excuse to continue the breakout, but there are still a lot of questions about the U.S.-China trade deal” and the global economy, he said.

A new round of talks aimed at resolving the trade dispute between the United States and China began in Washington on Tuesday, with top-level talks planned for later in the week.

Traders said they were cautious about taking new large positions ahead of the outcome of the talks.

In a red flag on the economic outlook, Europe’s biggest bank HSBC warned it may delay some investment this year as it missed profit forecasts for 2018 due to slower growth in China and Britain.

The Organization of the Petroleum Exporting Countries (OPEC) last week cut its forecast for global oil demand growth in 2019 to 1.24 million barrels per day. Some analysts think it could be weaker.

“Given a continued uncertain economic picture, our already relatively bearish outlook for 2019 of below 1 million bpd in global oil demand growth could be subject to further downward revisions,” analysts at JBC Energy wrote.

To stop the build-up of stocks that could hurt prices, OPEC+, which includes members of the producer group and allies such as Russia, began another supply cut of 1.2 million bpd on January 1. The cuts helped crude oil rise more than 20 percent.

Russian President Vladimir Putin and King Salman bin Abdulaziz Al Saud of Saudi Arabia, the de facto leader of OPEC, said they support continued coordination in global energy markets, the Kremlin said on Tuesday. Investors said the statement eased doubts that Russia would abide by the pact.

US sanctions against exporters Iran and Venezuela also supported oil prices.

Venezuela is a major supplier of crude oil to US refineries. Iran’s exports, while falling sharply since sanctions began in November, rose in early 2019, according to oil data and sources.

(Additional reporting by Alex Lawler in London, Henning Gloystein and Colin Packham; Editing by Dale Hudson, Marguerita Choy and David Gregorio)

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