Monday, 22 April, 2019

Oil hit by flaring tensions over U.S.-China trade

WTI Crude Oil Daily August WTI Crude OilMore
Priscilla Morrison | 20 June, 2018, 00:27

Brent crude futures, the global benchmark for oil prices, were at $78.05 per barrel at 0021 GMT, down 29 cents, or 0.4 percent, from their last close.

The other key development for global markets is the escalating trade dispute between the United States and China, in which both sides have threatened stiff tariffs on each others' key export goods.

The United States and China are threatening punitive tariffs on each other's exports, which could include oil supplies, resulting in stock market sell-offs on Tuesday.

Some traders are also saying that even if the increase covers the lost production from Venezuela due to economic issues and the reduced output from Iran due to the US sanctions, the rise in production may fall short of expectations if Iran, Iraq and Venezuela continue to produce at reduced rates.

US oil exports have boomed in the last two years as shale oil production has surged, with China becoming one of the biggest buyers.

Finally, investors are keeping an eye on China because it may follow-through on its threat to put a tariff on USA crude oil imports now that President Trump has threatened the world's second largest economy with about $200 billion in new tariffs.

More news: M’Baye Niang pounces to secure Senegal victory after Poland mix-up

The producer cartel of the Organization of the Petroleum Exporting Countries (OPEC), which is de-facto led by Saudi Arabia, and some allies including Russian Federation have been withholding output since the start of 2017.

Global oil demand will be revised downwards and as such oil will not be immune from all of the potential negative impact of worldwide trade wars.

They will meet in Vienna on June 22 to decide forward production policy.

Greg McKenna, chief market strategist at futures brokerage AxiTrader said there would likely be oil price volatility in the week ahead of the meeting.

"We share the general expectation that supply quotas will be increased, but probably more in line with the smaller range being quoted (300,000-600,000 bpd) given the lack of consensus amongst OPEC members", said Jack Allardyce, oil and gas research analyst at Cantor Fitzgerald Europe.

Energy consultancy Wood Mackenzie said the United States "would find it hard to find an alternative market that is as big as China". "We call upon our brothers in OPEC and Russia that we do not need to appease Trump, who sanctions two OPEC founders and also Russia", Kazempour Ardebili said.

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