Oil slides further as gloomy Chinese economic outlook weakens sentiment

Higher US inventories are also affecting markets with Brent and WTI both down 2 per cent in early trading

China's economy to grow 5.8 per cent in 2020, according to Goldman Sachs. EPA

Oil prices continued to slide on Tuesday as markets were weighed down by persistent uncertainty over the trade truce between the world's two biggest economies, weak Chinese economic data and a rise in US crude inventories.

Brent, the benchmark against which more than half of the world's crude is priced, fell further below the $60 per barrel mark, wiping out last week's gains following an attack on an Iranian tanker on Friday.

The European benchmark fell 1.8 per cent and was trading at $58.27 per barrel at 1.18pm UAE time. West Texas Intermediate, which largely tracks North American crude grades, was down 1.8 per cent and was trading at $52.60 per barrel.

The slump comes amid uncertainty over a truce agreed on tariffs by the US and China, whose trade war has dampened global economic growth and helped fuel recessionary concerns.

Over the weekend, trade representatives from Washington and Beijing worked to agree on a detente of sorts, with the US administration agreeing to freeze tariffs that were due to be introduced on $250 billion (Dh918bn) worth of Chinese goods.

In return, China agreed to purchase $40bn to $50bn worth of American farm products such as soybeans and livestock.

The markets are also fretting over a build-up in US oil inventory, which rose by 3.1 million barrels last week, as well as gloomy economic data from China.

China's factory deflation worsened more than expected last month as slowing production growth and falling prices for raw materials concerned markets about a domestic slowdown for Beijing's economy.

The producer price index declined 1.2 per cent from a year earlier, according to a Bloomberg survey. Surging prices for consumer goods, such as livestock, also pushed consumer inflation higher, weakening household purchasing power.

Chinese imports also declined for the ninth time over the past 10 readings, dropping 8.5 per cent in September, while exports declined 3.2 per cent in dollar terms compared with last year, according to Bloomberg.

Chinese output dragged at its slowest pace in 30 years in the third quarter, according to Chinese government estimates. Beijing is set to release gross domestic product data on Friday.

Meanwhile, the International Energy Agency also slashed projections for oil demand growth by 100,000 barrels per day for this year and next, observing that demand fundamentals are outweighing geopolitical risk premiums.

The IEA's latest forecast is one of several downward revisions made to oil demand growth projections this year by the organisation. Last month, it trimmed its global oil demand growth estimates for this year and 2020 to 1.1 million and 1.3 million bpd, respectively, which is the slowest pace since the 2008 financial crisis as concerns grow about the impact of trade disputes on global growth.