Intensifying trade war takes its toll on oil

Tokyo — Oil prices were lower on Monday after new tariffs imposed by the US and China came into force, raising concerns about a further hit to global growth and demand for crude.

Brent crude was down 27 cents, or 0.5%, at $58.98 a barrel in early-morning trading, while US oil was down 2c at $55.083 a barrel.

The US began imposing 15% tariffs on a variety of Chinese goods on Sunday — including footwear, smartwatches and flatscreen televisions — as China put new duties on US crude, the latest escalation in a bruising trade war.

US President Donald Trump said the sides will still meet for talks later in September.

Trump, writing on Twitter, said his goal is to reduce US reliance on China and he again urged American companies to find alternate suppliers outside China.

Beijing’s levy of 5% on US crude marks the first time the fuel has been targeted since the world’s two largest economies started their trade war more than a year ago.

“The trade and tariff overhang is inescapable for oil markets, so while trade uncertainties persist, it will be difficult for oil to shrug off concerns about the threat to global demand,” said Stephen Innes, APAC market strategist at AxiTrader.

South Korea’s exports tumbled in August for a ninth consecutive month, on sluggish demand from its biggest buyer, China, and depressed prices of computer chips globally, government data showed on Sunday.

The bleak data clouded the outlook for Asia’s fourth-largest economy while a brewing trade dispute with Japan emerged as a new risk on top of the prolonged US-China trade war.

Elsewhere, oil output from Opec members rose in August for the first month in 2019 as higher supply from Iraq and Nigeria outweighed restraint by top exporter Saudi Arabia and losses caused by US sanctions on Iran, a Reuters survey found.

In the US, energy companies cut drilling rigs for a ninth consecutive month to the lowest level since January 2018.

Reuters