BUS-190921-US-CHINA-TRADE-WAR3-(Read-Only)
A worker at a factory making industrial robots in Zhengyu, China. Image Credit: AP

(Bloomberg) - Oil dropped after surging the most in almost a month on Friday on signs investors are skeptical that progress in the U.S.-China trade talks will improve a worsening global demand outlook.

Futures in New York fell as much as 1.2% after closing up 2.2% in the previous session. Washington and Beijing made several concessions to reach a partial trade deal last week, and are aiming for a more comprehensive agreement before the end of the year. An attack on an Iranian crude tanker in the Red Sea on Friday also kept Middle East tensions high and contributed to price gains.

While the the U.S.-China detente is buoying financial markets, there’s still a lot of investor skepticism on whether this is a real turning point in the long-running trade conflict and if it will lead to a meaningful improvement in economic growth and crude demand. Hedge fund bets on declines in West Texas Intermediate have more than doubled in the last three weeks.

The concessions agreed to by the U.S. and China on Friday “won’t alter the weakening demand growth outlook because the existing tit-for-tat tariffs will remain in place,” said Vandana Hari, the founder of Vanda Insights in Singapore. “The mild fear premium in crude on account of the Iranian tanker attack in the Red Sea on Friday is also unlikely to stick.”

WTI for November delivery dropped 61 cents, or 1.1%, to $54.09 a barrel on the New York Mercantile Exchange as of 7:33 a.m. in London. It advanced $1.15 on Friday, the most since Sept. 16, capping a weekly gain of 3.6%.

Brent crude for December settlement fell 72 cents, or 1.2%, cents to $59.79 a barrel on the ICE Futures Europe Exchange after climbing 2.4% on Friday. The global benchmark traded at a $5.66 premium to WTI for the same month.

Under the so-called phase-one deal, Beijing has agreed to buy more agricultural products and gave vague commitments on currency and intellectual property. In return, the White House suspended a tariff increase due to take effect this week, but left a planned import tax on all remaining Chinese goods that’s set to be imposed in December on the table. The tentative agreement won’t roll back existing levies and isn’t expected to have much impact on global economic growth projections for now.

See also: China Is Cool on Trump Trade ‘Deal’ Its Economy Still Needs

Iran said initially that the attack on Friday probably came from Saudi Arabia, but later withdrew the claim. The incident, which caused a spill and spurred a sharp jump in crude prices, came after Sept. 14’s devastating strike on Saudi oil facilities that Riyadh blamed on Tehran. The kingdom denied any involvement in the Red Sea attack.