Trade Tensions Weigh on Crude Prices

Javier Stokes
April 9, 2018

Oil fell by more than 2 percent on Monday, pressured by a rise in Russian production, expectations that Saudi Arabia will cut prices of the crude it sends to Asia and a deepening trade spat between China and the United States.

Futures in NY slipped as much as 2.1 percent to the lowest intraday price since March 20.

The fall had exceed $1 per barrel before losses were pared by U.S. data released mid-morning showing a reduction of 4.6 million barrels to 425.3 million barrels in the previous week's crude inventories. Trump also tried to quell trade war fears on Wednesday, Tweeting that "We are not in a trade war with China".

"The risks of potential "trade wars" and the potential negative impact on the global economy and on oil demand if these risks do materialize should constitute a serious concern for OPEC", the report read.

Oil prices rose on Monday, holding near $70 a barrel, underpinned by a slowdown in US drilling activity and falling global stocks. "Markets from equities to oil now seem to quickly brush off and recover as the trade dispute between the US and China continues".

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West Texas Intermediate for May delivery was at $62.38 a barrel on the New York Mercantile Exchange, down $1.13, at 11 London, after rising 50 cents on Tuesday. The more-active June contract rose 58 cents to settle at $69.34. Total volume traded on Thursday was about 23 percent below the 100-day average. Prices slipped 10 cents, or 0.2 percent, to $68.02 Wednesday.

Prices pared losses after the Energy Information Administration released data showing US crude inventories USOILC=ECI fell by 4.6 million barrels in the latest week. The EIA data also showed that American oil production rose to an unprecedented level of 10.5 million barrels a day last week, topping 10 million barrels a day for a ninth week.

After a day of concern over tit-for-tat responses between the United States and China over tariffs on various products, market nerves were calmed as US officials said the countries could negotiate.

Hitting back on the Trump administration's plan to levy tariffs on $50 billion-worth of its goods, China proposed duties on United States imports including soybeans, aircraft, cars and chemicals. The Asian nation said on Wednesday it would levy an additional 25-percent tariff on about $50 billion of USA imports, following which the White House National Economic Council Director Larry Kudlow spent much of the day trying to calm markets.

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