Oil drops as market awaits news on trade talks, oversupply concerns weigh

US oil prices fell for a second day on Tuesday, weighed down by uncertainty over whether US-China trade talks are making much progress, while higher Saudi Arabian crude output reinforced concerns about oversupply.

US West Texas Intermediate (WTI) crude was down 18 cents, or 0.3%, at $56.68 a barrel. The contract dropped 0.7% in the previous session.

Brent crude futures were down 14 cents, or 0.2%, at $62.04 a barrel by 0256 GMT, after falling 0.5% on Monday.

Worries about the impact on oil demand from the fallout of the 16-month US-China trade war, which has weighed on global economic growth, have returned after doubts were cast on the chances of a so-called phase one agreement.

US President Donald Trump said on Saturday that talks with China were moving along "very nicely" but the United States would only make a deal if it was the right one for Washington. He also there had been incorrect reporting about US willingness to lift tariffs.

"Oil prices are struggling at the start of the week as trade concerns derail some of the momentum we saw in October that a phase one deal would deliver a boost for energy demand," said Edward Moya, senior market strategist at OANDA.

Caution ruled in other markets ahead of a speech by Trump to the Economic Club of New York later in the day in case there was any new word on an agreement.

On the supply side, Saudi Arabia raised its oil output in October to 10.3 million barrels per day (bpd), although it kept its supplies to oil markets below its OPEC output target.

The Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, will probably extend a deal to limit crude supply but are unlikely to deepen their cuts, Oman's energy minister said.

OPEC+, which has cut output by 1.2 million bpd since January under a deal set to last until March 2020, will next meet in early December.

Elsewhere, US data showed that crude inventories at Cushing, the delivery point for WTI, fell about 1.2 million barrels in the week to November 8, traders said, citing market intelligence firm Genscape.

Cushing inventories had grown for five weeks in a row through November 1, according to government data.

Demand growth may pick up next after a year of dashed expectations amid the US-China trade war, Fitch Solutions Macro Research analysts said in a new report.

"Our data show that 2019 will mark the nadir of oil demand growth over the next five years," Fitch Solutions said.

"We forecast demand to (grow) by around 0.5% this year, rising to 0.8% in 2020," the report said, although it added that "trade and political risks remain extremely elevated."