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Oil prices edge down as wary traders eye upcoming OPEC+ meeting

LONDON (Reuters) – Oil prices were steady on Monday helped by reports that OPEC and Russia were closer to a deal on extending oil cuts but held back by renewed tension between the United States and China.

FILE PHOTO: A pump jack on a lease owned by Parsley Energy operates in the Permian Basin near Midland, Texas U.S. August 23, 2018. Picture taken August 23, 2018. REUTERS/Nick Oxford

Benchmark Brent crude LCOc1 was up 19 cents, or 0.5%, at $38.03 a barrel at 1126 GMT. U.S. crude CLc1 had dipped 11 cents, or 0.3%, at $35.38 a barrel.

The Organization of the Petroleum Exporting Countries and Russia, part of a group known as OPEC+, are moving closer to a compromise on the duration for extending oil output cuts and were discussing rolling over the curbs one to two months, two OPEC+ sources told Reuters.

Algeria, which holds the rotating OPEC presidency, has proposed that OPEC+ hold a meeting on June 4 rather than the previously planned June 9-10. Russia has said it has no objection to meeting sooner.

“The fact that crude … prices have not reacted much to the news of the potential cut extension can be seen as a sign that the market has already priced in a lot of optimism,” JBC Energy analysts said in a note.

Tension between China and the United States was also encouraging some caution after Beijing warned of retaliation on U.S. moves over Hong Kong.

China has asked its state-owned firms to halt purchases of soybeans and pork from the United States, two people familiar with the matter said. China could expand the order to include additional U.S. farm goods if Washington took further action, the people said.

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“The possibility of heightened tensions does pose a risk for the recent rally in oil prices,” said Harry Tchilinguirian, head of commodity research at BNP Paribas.

U.S. President Donald Trump’s directive to begin the process of eliminating special treatment for Hong Kong is likely to create a new driver of volatility in global markets as tensions between Washington and Beijing climb again.

Manufacturing data has also showed that Asian and European factories were struggling as lockdowns due to the coronavirus pandemic kept demand in check.

Additional reporting by Florence Tan in Singapore and Jessica Resnick-Ault in New York; Editing by Louise Heavens and David Evans

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