Investing.com - Russia's apparent disinclination to come further into OPEC's game and delays in the U.S.-China summit are frustrating oil bulls hopes of seeing U.S. crude above $55 per barrel.
Crude prices tumbled more than 3% early in the day after Russian Energy Minister Alexander Novak poured cold water over Saudi Arabia's hopes, as reported by the Wall Street Journal, to lure Moscow and the group of 10 non-OPEC oil producers it leads into a formal pact with the Organization of the Petroleum Exporting Countries to better manage oil prices.
Adding to the bearish sentiment, CNBC reported that a meeting between President Donald Trump and his Chinese counterpart Xi Jinping was "highly unlikely" before the March 1 deadline set by the U.S. for reaching a trade deal. Lower growth forecasts from the European Union also heightened fears of a global economic slowdown. The existing tariff schedule is likely to remain in place, however, news reports said.
New York-traded West Texas Intermediate crude settled down $1.37, or 2.5%, at $52.64 per barrel. It had been down as much as 4.1%. WTI has had a volatile week thus far. It briefly reached $55.75 on Monday, a level last seen in November. But it fell back by the close on Monday and again on Tuesday before recovering back to $54.01 on Wednesday.
Brent, the London-traded global oil benchmark, settled down $1.06, or 1.7%, to $61.63 per barrel after falling 3.3% after the open. Brent hit 2019 highs of $63.63 on Monday before joining WTI in a zig-zag pattern.
Despite supportive weekly U.S. energy data, worsening Venezuelan production and relentless supply OPEC cuts intermittently propping oil prices up this week, "there are still fears of slowing demand," said Phil Flynn, analyst at The Price Futures Group brokerage in Chicago.
Russia's Energy Minister Novak said the 10 countries collaborating with OPEC now on oil price support could discuss a charter outlining open-ended cooperation when the two groups meet in April, state-owned TASS news agency reported.
A formal OPEC+10 joint structure, as suggested in the WSJ report earlier this week, would only lead to additional red tape and the risk of U.S. sanctions against monopolies, Novak added, TASS said.
John Kilduff, an energy hedge fund manager in New York who's familiar with Russia's oil industry, said earlier this week that while Moscow had committed to production cuts with OPEC to boost crude prices, it was unlikely to get any deeper into the cartel's game for fear of jeopardizing its own oil market share in the long run.
“The Russians know that when they are forced to proactively keep their supplies tight at all times to support prices, they are only going to foster more barrels from other competitors who aren’t playing by such rules," Kilduff had said.
The protracted U.S.-Sino trade war is also preventing oil from breaking into a clear rally, given China role as the second largest economy and the world's top oil importer.
Trump has vowed to increase U.S. tariffs on $200 billion worth of Chinese imports to 25 percent from 10 percent currently if the two sides cannot reach a deal by March 1.
CNBC said that while the U.S. President and Xi were still expected to meet, there was too much work to be done to flesh out a deal with China and, at the same time, prepare Trump for a high-stakes meeting with North Korea's Kim Jong Un. Trump's summit with Kim is set for Feb. 27-28.