Oil dips in nervous trading as US-China trade war looms

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Oil dips in nervous trading as US-China trade war looms

USA crude futures added 29 cents, or 0.4 percent, to $74.09, Reuters reports.

So far, WTI's relative resiliency is not something that would please USA president Donald Trump, who in tearing up the nuclear deal with Iran and reimposing sanctions against the Islamic republic, is betting that Saudi Arabia and other countries will not only make up for the shortfall in Iranian crude exports but also flood the market with enough product to reduce gas prices at the American pump.

The U.S. rig count, an early indicator of future output, is much higher than a year ago as energy companies have ramped up production in response to higher prices.

That came after an outage at a major Canadian oil sands facility cut regional supply.

Traders are paying attention to the escalating trade dispute between the United States and China although the current products caught in the tariff war are not energy-related.

Oil prices rose on Monday as increased global demand and US efforts to shut out Iranian output using sanctions outweighed drilling data suggesting USA shale production would climb.

Brent crude futures were down 7 cents, or 0.1 per cent, at $77.32.

Weighing on prices was a rise in U.S. crude inventories C-STK-T-EIA of 1.2 million barrels in the week to June 29, to 417.88 million barrels, the U.S. Energy Administration (EIA) said on Thursday.

"If China imposes tariffs, their refineries won't buy US crude since it would cost more", Sandy Fielden, director of research for commodities and energy at Morningstar Inc., said by telephone.

Beijing has threatened a 25 percent tariff on US crude imports, although it has not specified an introduction date.

An executive from China's Dongming Petrochemical Group said he expected Beijing to soon impose the tariff on United States oil imports.

"Indian refiners can't absorb all the US oil that was going to China".

The potential trade war between the United States and China comes amid a tight oil market.

-Chinese trade war and increased production by Saudi Arabia and Russian Federation pulled against concerns over supply disruptions from Venezuela and Libya as well as the looming sanctions on Iran.

"Iran's exports are some 2.7-million barrels a day, including condensate", it noted.

"Because the oil market is already in tight supply due to the numerous outages, this would drive worldwide prices (Brent) further up", Commerzbank said, in a note, Reuters reported.

Two other sources said South Korea cancelled July loadings of crude and condensate cargoes from Iran as it was uncertain whether the country would receive an exemption from USA sanctions on Iran trade.

Although Saudi Arabia and Russian Federation have said they would raise output to make up for disruptions, FGE said "there simply is not enough capacity to make up for Iran's crude losses, plus Venezuela and Libya", and warned of the possibility of oil prices rising to $100 per barrel.

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