Oil prices oscillate in jittery market as US-China trade war begins

Singapore/Beijing — Oil prices seesawed on Friday in a nervous market as the US implemented a raft of tariffs on Chinese goods, which should prompt Beijing to retaliate, potentially including a duty on US crude imports.

Oil prices fell early on Friday along with stock markets.

But by 5.28am GMT, US West Texas Intermediate (WTI) crude futures were up 13c or 0.2% from their last settlement at $$73.07 a barrel.

Brent crude futures were down 6c or 0.1% at $77.33 a barrel.

Looming over the oil markets is the trade dispute between the US and China, the world’s two biggest economies.

Washington put the tariffs in place on Chinese goods from 12.01am Washington DC time (4.01am GMT) on Friday.

China has said it will retaliate, and major Chinese ports have already delayed clearing goods from the US, according to several sources.

“We’re headed for an unparalleled trade conflict between the world’s largest economies,” said Stephen Innes, head of Asia-Pacific trading at brokerage Oanda.

As part of the retaliatory response, Beijing has threatened a 25% tariff on US crude imports, although it has not specified an introduction date.

The US ships about 400,000 barrels a day of crude to China, worth $1bn a month at current prices.

Tariffs would make US oil uncompetitive in China.

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

He said his refinery had cancelled US crude orders and would switch to Middle East or West African supplies instead.

Tariffs, sanctions and disruptions

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

Energy consultancy FGE warned on Friday of looming supply shortages due to US sanctions against Iran, and because of disruptions elsewhere.

“Iran’s exports are some 2.7-million barrels a day, including condensate,” it noted.

Even if the US government grants some waivers to allies, FGE estimated 1.7-million to 2-million barrels a day of crude and condensate would be cut out of markets once its sanctions were implemented.

US investment bank Jefferies said on Friday it expected a decline in Iranian exports “well in excess” of 1-million barrels a day due to the US sanctions.

Some are already reacting. South Korea, a major buyer of Iranian oil and condensate, will not lift any Iranian oil in July for the first time since August 2012, three sources familiar with the matter said on Friday.

Cutting Iran out from oil trading comes amid other disruptions.

“Venezuela … will lose another 400,000 barrels a day by year-end, with production going to below 1-million barrels a day,” FGE said, noting that another 300,000 barrels a day of Libyan capacity was disrupted.

Although Saudi Arabia and Russia 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 a barrel.

Reuters

Source: businesslive.co.za