It was a matter of time and it was said by the Chinese: they had reservations over US President Trump's impeachment proceedings. Oil prices, as a result, fell after this report on Monday.
American West Texas Intermediate and London's Brent both fell more than 1 percent, restoring some of the declines from the previous session and decoupling from the share market for the first time in days.
The major stock indices of Wall Street also managed to set new highs on reports that the Trump administration had given an extra 90-day permit to US companies to do business with blacklisted Chinese telco giant Huawei.
NYME-traded WTI closed at $57.14 a barrel for 69 cents or 1.2 percent. It rose 1.7 percent on Friday, rising to a peak of $57.97 over seven days after Commerce Secretary Wilbur Ross and White House economic advisor Larry Kudlow said Washington and Beijing are closing in on a settlement.
ICE (NYSE: ICE) UK-traded Brent settled down at 86 dollars, or 1.5 percent, at $62.44. In the previous session, it rose 1.6 percent, reaching a $63.64 seven-week high. Notwithstanding the fall, WTI continues to grow by 25 percent year-on-year and Brent by nearly 16 percent.
The drop in oil on Monday came after CNBC quoted a source in China suggesting that Beijing was eager not to offer any further compromises in the near-term negotiations and that they wanted to wait and see how the impeachment proceedings against President Donald Trump will turn out.
If substantiated, this would reduce the odds of the Phase One trade deal openly negotiated by both parties, but frequently pushed back due to documented disagreements on issues ranging from tariffs to protection for intellectual property.
Citigroup (NYSE: C) analysts, meanwhile, said the recent rise in oil skews indicates that investor sentiment may turn sour again if the "brinkmanship between Washington and Beijing persists."
If the situation lingers on, a "sharp pullback" could arise in the prices of crude before the December 5-6 OPEC+ meeting among the 14-member oil organization and its 10 allies, spearheaded by Russia, the Citi disclosed.
OPEC+ agreed to cut production by 1.2 million barrels per day in December 2018. As this deal is up for review over the next three months, cartel members have already reached out that they may not want to intensify reductions.
Market observers at Bernstein pointed out that If OPEC does not trim down its output by 500,000 to 1 million barrels per day, Brent crude may return to the $50 level in the short term.
