LONDON (Reuters) – Oil prices rose on Tuesday after China signaled progress in trade talks with the United States, but gains were capped by bearish forecasts of a buildup in U.S. crude stockpiles.

FILE PHOTO: Oil rigs are seen at Vaca Muerta shale oil and gas drilling, in the Patagonian province of Neuquen, Argentina January 21, 2019. REUTERS/Agustin Marcarian

Brent crude oil LCOc1 was up 31 cents at $59.27 a barrel by 1021 GMT, while U.S. West Texas Intermediate crude CLc1 was 16 cents higher at $53.47 per barrel.

China and the United States have achieved some progress in their trade talks, Vice Foreign Minister Le Yucheng said on Tuesday, and any problem could be resolved as long as both sides respected each other.

“While the encouraging mood across financial markets will remain stimulated by trade optimism, risk aversion could still make an abrupt return should talks drag on or turn sour,” said Lukman Otunuga, analyst at FXTM.

The International Monetary Fund last week forecast that fallout from the U.S.-China trade war and trade disputes across the world would slow global growth in 2019 to 3.0%, the weakest in a decade.

(Graphic: PMI, here)

Lower economic growth typically means reduced demand for commodities such as oil.

Oil prices however were pressured by forecasts of a buildup in U.S. crude stockpiles. Inventories are expected to have risen for a sixth straight week, while distillates and gasoline stocks likely fell in the week to Oct. 18, a Reuters poll showed.

The poll was conducted ahead of reports from the American Petroleum Institute (API), an industry group, and the Energy Information Administration (EIA), an agency of the U.S. Department of Energy.

“Expectations that the API and EIA will report that U.S. crude oil inventories increased by around 3 million barrels over the last week certainly do not help sentiment,” ING analyst Warren Patterson said.

“These more visible stock builds, along with demand concerns continuing to linger, suggest it is becoming increasingly more difficult to see a sustained rally in prices ahead of the OPEC+ meeting in early December.”

The Organization of the Petroleum Exporting Countries, Russia and other oil producers, an alliance known as OPEC+, have pledged to cut production by 1.2 million barrels per day (bpd) until March 2020. The producers meet again on Dec. 5-6.

Russian Energy Minister Alexander Novak said U.S. oil production is likely to peak in the next few years as current oil prices are capping the pace of expansion.

Goldman Sachs has wound back its forecast for growth in U.S. shale oil output in 2020, and slightly reduced its outlook for 2020 global oil demand growth.

Reporting by Bozorgmehr Sharafedin, additional reporting by Jane Chung in Seoul; Editing by Dale Hudson and Jan Harvey



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