Oil prices were under pressure midweek, hammered by US President Donald Trump’s negative comments about a resolution for the US-China trade dispute and signs of a speedy recovery in Saudi oil production following the 14 September attacks on the kingdom’s crude processing facilities.

A surprise rise in US weekly inventories added to the rout.

The market had come under sustained selling pressure earlier in the week with the focus switching from geopolitical risks to worries over weak demand for oil because of a slowing world economy.

Trump criticised China’s trade practices at the United Nations General Assembly on Tuesday, saying he would not accept a “bad deal” in US-China trade negotiations. China is the world’s largest oil importer and second-largest crude user. The US is the largest consumer of oil.

Trump also said he saw a path to peace with Iran even as he denounced the nation for “bloodlust”, cooling other risk premiums built into oil prices that had initially soared by 20% early last week in the immediate aftermath of the attacks on the Abqaiq and Khurais facilities in Saudi Arabia.

International benchmark Brent futures were fetching around $62.08 per barrel in London in the middle of this week, compared with $64.20 at the same time last week.

Meanwhile, US West Texas Intermediate crude was changing hands at around $56.35 per barrel in New York trading, down from last week’s $58.70. Elsewhere, the US Energy Information Administration (EIA) reported a larger-than-expected 2.4 million-barrel build in crude inventories in the latest week.

The EIA also reported a 500,000-barrel increase in gasoline stockpiles as well as a 3 million-barrel draw in distillate holdings.

The market’s “focus will return to faltering oil demand concerns as there is unlikely to be any quick resolution to US-China trade differences to positively shift economic expectations”, BNP Paribas global oil strategist Harry Tchilinguirian told the Reuters Global Oil Forum. “Barring a repeat attack on Saudi infrastructure, oil will weaken further,” he said.

Saudi Arabia claimed to have restored its oil production capacity to 11.3 million barrels per day, maintaining a faster-than-expected recovery after the attacks blamed on Iran.

Saudi Energy Minister Prince Abdulaziz bin Salman and the chief executive of state oil company Aramco, Amin Nasser, have said output will be fully back online by the end of September. Output from the Khurais field is now at 1.3 million bpd and the Abqaiq plant is currently at about 4.9 million bpd, Saudi sources reportedly said.

Meanwhile, Iran said it is willing to give reassurances on not seeking nuclear arms and will accept changes to its 2015 nuclear accord with world powers if the US were to return to the deal and lift sanctions.

“If the sanctions are ended and there is a return to the (nuclear) accord, there is room for giving reassurances towards breaking the deadlock and the president (Hassan Rouhani) has even a proposal for small changes in the accord,” government spokesman Ali Rabiei said.

Traders will remain focused on the US-China trade negotiations and developments in the Persian Gulf to decide their short-term moves.

Weekly

Prices dip on US-China friction