Oil heads lower as trade fight grows
OIL TRADED near a seven-week low as China retaliated against the US administration’s latest tariffs, heightening trade tensions between the world’s two biggest economies.
West Texas Intermediate (WTI) futures fell 0.1 percent after sliding 3.2 percent on Wednesday. China will slap 25 percent duties on an additional $16 billion (R213.88bn) worth of US goods, including petroleum products, from August 23.
Prices declined on Wednesday as Energy Information Administration data showed US diesel and petrol stocks gained and crude inventories dropped less than forecast. Crude has fallen from the highs of June as the US and China show no sign of backing down from the trade fight, raising concerns over global economic growth.
Investors are also closely watching whether Saudi Arabia and other producers will increase output to replace potential supply losses from Iran as President Donald Trump is set to impose sanctions on the country’s oil exports from November.
“The fears of a slowdown in trade activities spilling over to the oil market weighed on prices since a slowdown in the world’s two largest economies could affect demand for oil,” said Michael Poulsen, an analyst at Global Risk Management.
WTI crude for September delivery was at $66.87 (R893.90) a barrel on the New York Mercantile Exchange at 10.57am. The contract declined $2.23 to $66.94 on Wednesday, the lowest close since June 21. Total volume traded was about 10 percent below the 100-day average.
Brent for October settlement traded at $72.31 a barrel on the London-based ICE Futures Europe exchange, up 3c, after dropping $2.37 on Wednesday. The global benchmark crude traded at a $6.06 premium to WTI for the same month.
China would apply 25 percent tariffs on US diesel, petrol, propane and other petroleum products, said the commerce ministry. While crude has been spared this time, the Asian nation may impose duties at a later date if Trump doesn’t back down, according to Li Li, a research director at ICISChina. – Bloomberg