Oil slips as trade rows escalate, casting doubt on future demand

London — Oil prices slipped on Friday as an escalating trade dispute between the US and other major economies cast doubt on future demand growth, although markets remain tight due to supply disruptions and looming US sanctions against Iran.

US light crude oil was 20c lower at $73.25 a barrel at 7.30am GMT. On Thursday, the contract hit its highest since November 2014 at $74.03 a barrel. Brent crude was unchanged at $77.85 a barrel.

The trade disputes between the US on one side and major economies, including China, India and the EU, on the other are beginning to cloud the outlook for global economic growth. Traders worry that tariffs on exports, including US crude oil, will hamper the flow of goods and stall trading, and eventually hit demand for oil.

Commodities brokerage Marex Spectron said this week that the macro-economic outlook was “overwhelmingly bearish”.

Despite the trade dispute, oil supply is tight. North American oil stocks have fallen as an outage at Canada’s Syncrude has locked in more than 300,000 barrels per day (bpd) of production. The outage is expected to last at least to the end of July, according to operator Suncor Energy.

Outside North America, record demand and voluntary supply cuts led by oil cartel Opec have pushed up prices. Unplanned supply disruptions from Libya to Venezuela have further tightened the market.

Opec and Russia have said they will raise output to meet demand and replace crude from unplanned disruptions, but many analysts think the extra supply may be inadequate. “The clear message from the ‘Opec-Plus’ meetings was that those countries with spare capacity would increase production to keep the market well-supplied,” US Jefferies bank said on Friday.

The US government is trying to shut Iran out of oil markets when it fully implements its sanctions in November. “The Trump administration looks poised to carry on with a maximum pressure campaign on Tehran,” Phillip Futures said.

Major buyers of Iranian oil, including Japan, India and South Korea, have indicated that they may stop importing Iranian crude if US sanctions are imposed. Until then, however, Asia is buying as much Iranian oil as possible.

Imports of Iranian crude oil by major buyers in Asia rose in May to the highest in eight months. China, India, Japan and South Korea, last month, imported 1.8-million bpd from Iran, up 15% from a year ago.

Reuters

Source: businesslive.co.za