Oil falls as traders weigh potential US-China trade talks

Oil prices fell on Friday as traders squared positions ahead of an OPEC+ meeting and amid some scepticism about a potential de-escalation of the trade dispute between China and the United States.

Brent crude futures were down 23 cents, or 0.4 per cent, to $61.90 a barrel at 1105 GMT, while US West Texas Intermediate crude futures fell 24 cents, or 0.4 per cent, to $59 a barrel.

For the week, Brent was on track for a 7 per cent drop and WTI was down 6.5 per cent so far, the biggest weekly declines in a month.

China's Commerce Ministry said on Friday that Beijing was ‘evaluating’ a proposal from Washington to hold talks aimed at addressing US President Donald Trump's sweeping tariffs, signalling a possible easing of the trade tensions that have rattled global markets.

"There is some optimism when it comes to US-China relations but the signs are only very tentative," said Harry Tchilinguirian, group head of research at Onyx Capital Group. "It's still very fluid, a one step forward, two steps back situation when it comes to tariffs."

Concerns that the broader trade war could push the global economy into a recession and crimp oil demand, just as the OPEC+ group is preparing to raise output, have weighed heavily on oil prices in recent weeks.

Complicating any talks was a threat from Trump to impose secondary sanctions on buyers of Iranian oil. China is the world's largest importer of Iran's crude.

Trump's comments followed a postponement of US talks with Iran over its nuclear programme. He had previously restored a "maximum pressure" campaign against Iran, which included efforts to drive the country's oil exports to zero to help prevent Tehran from developing a nuclear weapon.

Oil prices gained late in Thursday's session to settle nearly 2 per cent higher on Trump's remarks, erasing some of the losses recorded earlier in the week on expectations of more OPEC+ supply coming to the market.

Several OPEC+ members are set to suggest the group accelerates output hikes in June for a second consecutive month, Reuters previously reported. Eight OPEC+ countries will meet on May 5 to decide a June output plan.

Reuters on Wednesday reported that Saudi Arabia, de facto leader of OPEC+, had briefed allies and industry experts that it was unwilling to prop up oil prices with further supply cuts.

"With non-OPEC+ supply rising robustly and global demand growth facing structural decline, we see no natural re-entry point for these barrels and, ultimately, the group will likely have to endure some price pain no matter when it unwinds its cuts," Fitch's BMI research unit said in a note.