London — Oil prices weakened on Monday amid pessimism over U.S.-China trade talks and the prospect of slower economic growth globally that could reduce demand for crude.
Brent crude futures were down 33 cents at $63.13 a barrel by 1102 GMT. Prices rose 1.6% last week.
U.S. West Texas Intermediate crude was down 16 cents at $56.04 a barrel. WTI gained 1% last week.
Economic growth in the United States slowed less than expected in the second quarter with a boom in consumer spending, strengthening the outlook for oil consumption.
But non-U.S. growth is slowing faster, due partly to the country’s trade war with China over the last year.
“Even though the crude oil supply picture is fundamentally tight … and geopolitical risks front and centre, the market remains extremely bearish around demand risks due to the escalation in protectionist trade policies and the risk of additional punitive tariffs,” said Emily Ashford, director of energy research at Standard Chartered.
U.S. and Chinese negotiators meet this week for the first time since trade talks broke down in May, but expectations are low after President Donald Trump said China might not want to sign a trade deal until after the 2020 U.S. election.
“On the trade front, expectations may be low ahead of renewed Sino-U.S. talks but any positive echoes this week will lift market sentiment,” said Harry Tchilinguirian, global oil strategist at BNP.
Apart from U.S.-China talks, traders and investors are also keeping a close eye this week on the prospect of interest rate cut by the U.S. Federal Reserve.
U.S. central bankers are expected to lower borrowing costs this week for the first time since the depths of the financial crisis more than a decade ago.
“If the Fed’s comments prove accommodative and expectations of dollar weakening build up, oil and other commodity prices are likely to benefit,” Tchilinguirian said.
Crude prices were still supported by supply risk as tensions remain high around the Strait of Hormuz, the world’s most important oil passageway.
Britain warned Iran on Monday that it must follow international rules and release a British-flagged vessel seized in the Gulf this month.
Defying the pressure, Iran’s Revolutionary Guards published new footage of the seizure of the tanker.
U.S. energy companies last week reduced the number of oil rigs operating for a fourth week in a row, putting the rig count down for an eighth consecutive month.