Oil prices drop as escalating US-China trade war clouds demand outlook

CNBC

  • Market watching trade war impact on crude demand.
  • U.S. sanctions on Iran continue to support prices.
  • U.S. shale output expected to rise in October.

Oil markets fell on Tuesday as the latest escalation in the Sino-U.S. trade war clouded the outlook for crude demand from the two countries, which are the world’s top two oil consumers.

Brent crude futures dropped 44 cents, or 0.6 percent, to $77.61 per barrel by 0424 GMT.

U.S. West Texas Intermediate (WTI) crude was down 28 cents, or 0.4 percent, to $68.62 per barrel.

U.S. President Donald Trump on Monday said he would impose 10 percent tariffs on about $200 billion worth of Chinese imports.

“The growing trade dispute has hurt trading sentiment. The impact on economic growth is slowly dripping in, which again hurts oil prices,” Wang Xiao, head of crude research at Guotai Junan Futures, said on Tuesday.

Refineries in the United States consumed about 17.7 million barrels per day (bpd) of crude oil last week while China’s refiners used about 11.8 million bpd in August, according to government data from the countries, the most among the world’s countries.

The tariffs are likely to limit economic activity in both the China and the United States and that should lower oil demand growth as less fuel is consumed to move goods for trade.

The countries are the world’s two largest economies.

However, potential supply cuts caused by U.S. sanctions on Iran, the third-largest producer among the members of the Organization of the Petroleum Exporting Countries (OPEC), are providing some support for oil prices.

Sanctions affecting Iran’s petroleum sector will come into force from Nov. 4.

Iranian crude oil export loadings have declined by 580,000 bpd in the past three months, Bank of America Merrill Lynch analysts said in a note to clients.

Meanwhile, oil output from seven major U.S. shale formations is expected to rise by 79,000 bpd to 7.6 million bpd in October, the U.S. Energy Information Administration said on Monday.

Technical analysis from Reuters market analyst Wang Tao showed that U.S. oil prices have repeatedly failed to overcome a resistance level of $69.85 per barrel, signalling a dissipation of positive outlook.

Brent may fall more than $1 to $76.37 a barrel while WTI crude prices may revisit the Sept. 14 low of $67.94, he wrote.

On Monday, Russia’s Energy Minister Alexander Novak said that OPEC and non-OPEC members will discuss all possible supply scenarios when they meet this month in Algeria. Russia, the world’s largest oil producer, and other producers in OPEC have kept in place a supply agreement to maintain prices while at the same time providing enough oil to the market.

Oil prices ease as trade row clouds demand outlook

CNBC

  • Oil prices dipped on Monday as worries that the U.S. could impose additional tariffs on China outweighed concerns over the supply impact of impending sanctions by Washington on Iran.
  • U.S. President Donald Trump is expected to announce fresh tariffs on Chinese imports worth approximately $200 billion as early as Monday, according to a source which spoke to Reuters.

Global oil prices eased in early Asian trading on Monday on concerns that the United States is poised to impose additional tariffs on China, outweighing supply fears from upcoming sanctions on Iran.

Brent crude oil futures dipped 16 cents, or 0.2 percent to $77.93 a barrel by 0035 GMT.

U.S. West Texas Intermediate (WTI) futures fell 20 cents or 0.3 percent, to $68.79 a barrel.

“The market’s expectation of shortages has cooled after data from last week showed increases in supplies, while investors have lowered the outlook for oil demand,” said Wang Xiao, head of crude research with Guotai Junan Futures.

U.S. President Donald Trump is likely to announce new tariffs on about $200 billion on Chinese imports as early as Monday, a senior administration official told Reuters on Saturday.

The escalating trade row is raising concerns about the potential for slower growth in oil consumption, offsetting supply concerns stemming from upcoming U.S. sanctions on Iran over its nuclear program.

Refiners in India, Iran’s second largest crude buyer will cut their monthly crude loadings from Iran for September and October by nearly half from earlier this year.

Also weighing on oil prices, U.S. drillers added two oil rigs in the week to Dec. 1, bringing the total count up to 749, the highest since September, General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday.

Oil prices claw back some ground, but demand worries drag

CNBC

  • Oil prices saw a partial recovery on Friday.
  • Worries over emerging markets and the U.S.-China trade dispute continue to weigh on sentiment over future growth in oil demand.

Oil on Friday clawed back some of its losses from the previous session, when prices fell the most in a month, as concerns about oil supply are countering worries that emerging market crises and trade disputes could dent demand.

Brent crude was up 8 cents, or 0.1 percent, at $78.26 a barrel by 0338 GMT, after falling 2 percent on Thursday. The global benchmark rose on Wednesday to its highest since May 22 at $80.13.

U.S. West Texas Intermediate (WTI) futures were up 18 cents, or 0.2 percent, at 68.76 a barrel, after dropping 2.5 percent on Thursday.

Brent is heading for a 1.8 percent gain this week, while WTI is on track for a 1.5 percent increase.

“Prices remain well supported as the market continues to fret about ongoing structural supply issues elsewhere,” ANZ Research said in a note.

The International Energy Agency on Thursday warned that although the oil market was tightening at the moment and world oil demand would reach 100 million barrels per day (bpd) in the next three months, global economic risks were mounting.

“As we move into 2019, a possible risk to our forecast lies in some key emerging economies, partly due to currency depreciations versus the U.S. dollar, raising the cost of imported energy,” the agency said.

“In addition, there is a risk to growth from an escalation of trade disputes,” the Paris-based agency said.

China will not buckle to U.S. demands in any trade negotiations, the major state-run China Daily newspaper said in an editorial on Friday, after Chinese officials welcomed an invitation from Washington for a new round of talks.

U.S. President Trump said on Twitter on Thursday that the United States holds the upper hand in talks.

“We are under no pressure to make a deal with China, they are under pressure to make a deal with us,” Trump tweeted.

Still, supply concerns are supported by data showing that U.S. crude production fell by 100,000 bpd to 10.9 million barrels per day last week as the industry faces pipeline capacity constraints.

Though weekly output slipped, the United States likely surpassed Russia and Saudi Arabia earlier this year to become the world’s largest crude oil producer, based on preliminary estimates from the Energy Information Administration.

Although the EIA does not publish crude production forecasts for Russia and Saudi Arabia in its short term outlook, it expects that U.S. output will continue to exceed Russian and Saudi production for the remaining months of 2018 and through 2019.

The loss of Iranian oil to the market as refiners are cutting or halting purchase ahead of U.S. sanctions in November is also raising concerns about supply.

Oil prices steady as U.S. crude inventories fall, but trade tensions weigh

CNBC

  • U.S. crude inventories fall to Feb-2015 low of 401.49 million barrels.
  • But diesel, gasoline stocks rise after lackluster driving season.
  • Trade tensions weigh on markets.
  • U.S. crude oil production at 11 million barrels per day.

Oil prices held steady on Friday, as the market balanced a fall in U.S. crude inventories to the lowest levels since 2015, with Sino-American trade tensions and economic weakness from emerging markets.

U.S. West Texas Intermediate (WTI) crude futures were at $67.78 per barrel at 0448 GMT, up just 1 cent from their last settlement.

International Brent crude futures dipped 8 cents to $76.42 a barrel.

“Oil inventory data released last night showed a larger-than-expected draw in crude inventories,” said William O’Loughlin, investment analyst at Australia’s Rivkin Securities.

U.S. commercial crude oil inventories fell by 4.3 million barrels to 401.49 million barrels in the week to Aug. 31, the lowest since February 2015, U.S. Energy Information Administration (EIA) data showed on Thursday.

Despite that, analysts said prices were curbed by a rise in refined product stocks and a relatively weak U.S. peak fuel consumption season this summer, known as the driving season.

Gasoline stocks rose by 1.8 million barrels, while distillate stockpiles, which include diesel and heating oil, climbed by 3.1 million barrels, the EIA data showed.

“U.S. gasoline inventories are now above the top of the 5-year range,” said U.S. investment bank Jefferies in a note on Friday.

“The U.S. summer driving season has proven to be a lacklustre one in terms of gasoline demand,” said O’Loughlin of Rivkin Securities.

Ongoing emerging market weakness as well as potential new U.S. import tariffs on Chinese goods were also weighing on oil market sentiment.

“Emerging markets, which tend to have a higher energy intensity of GDP, are an obvious concern,” said Jefferies.

Asian shares slipped to a 14-month trough on Friday as investors feared a new round of Sino-U.S. tariffs, while currencies from Indonesia to India also remained under pressure.

On the supply side, U.S. crude oil production last week remained at a record 11 million barrels per day (bpd), a level it has largely been at since July.

After rising by almost a third in the last two years, Jefferies said: “U.S. production growth will now significantly decelerate until 4Q19.”

Outside the United States, U.S. sanctions against major oil producer Iran, which from November will target oil exports, are fueling expectations of a tighter market towards the end of the year.

“The main driver of oil prices, in our view, remains the re-imposition of U.S. … sanctions against consumers of Iranian oil,” said Standard Chartered this week.

“There is still considerable uncertainty over the strategies of China and India, Iran’s main customers.”

Washington has indicated it may offer temporary sanctions waivers to allied countries that are unable to immediately cease imports from Iran.

Oil dips on emerging market woes, but Iran sanctions support

CNBC

  • Asian shares fall for 6th straight session.
  • U.S. deadline for new China tariffs expires Thursday.
  • But U.S. sanctions against Iran seen tightening market.

Oil prices dipped on Thursday as emerging market woes weighed on sentiment, while a deadline neared for a potential new round of U.S. tariffs on another $200 billion of Chinese goods.

Looming U.S. sanctions against Iran, however, prevented prices from falling further as they are expected to tighten the market after being implemented from November, traders said.

U.S. West Texas Intermediate (WTI) crude futures were at $68.60 per barrel at 0424 GMT, down 12 cents, or 0.2 percent, from their last settlement.

Brent crude futures fell by 5 cents, to $77.22 a barrel.

Emerging market weakness is weighing on global economic growth prospects, with Asian shares on Thursday heading for their sixth straight session of losses.

Meanwhile, a public comment period on possible U.S. tariffs on another $200 billion of Chinese goods ends on Thursday, with expectations that U.S. President Donald Trump will impose the additional levies.

“The prospects of increased supplies from OPEC and her allies, and weaker demand from China and other emerging markets could weigh further on oil prices going forward, or at least limit the upside potential,” said Fawad Razaqzada, market analyst at futures brokerage Forex.

“This is because of the U.S. dollar’s strength, weighing heavily on emerging market currencies, including the yuan, which in turn has pushed up the costs of all dollar-denominated commodities,” he added.

For now, oil demand remains strong.

U.S. crude stockpiles fell last week as refineries boosted output amid strong consumption, data from industry group the American Petroleum Institute showed on Wednesday.

Crude inventories fell by 1.17 million barrels to 404.5 million barrels in the week to Aug. 31, while refinery crude runs rose by 198,000 barrels per day (bpd), the data showed.

The Organization of the Petroleum Exporting Countries (OPEC) said on Wednesday it expected global oil demand to break through 100 million bpd for the first time this year.

Meanwhile, there are concerns that U.S. sanctions against Iran, which will target the OPEC-member’s oil industry from November, will tighten global supply.

“The Brent forward curve has inverted to backwardation, signalling a tightening market that already feels the effects of declining Iranian exports,” U.S. investment bank Jefferies said in a note on Thursday.

Backwardation describes a forward curve in which prices for immediate delivery are higher than those for dispatch later on. This signals tight market conditions as it gives traders an incentive to immediately sell oil instead of putting it into storage.

Front-month Brent crude is currently more than $3 per barrel more expensive than for September 2019.

“The strength of demand is a concern, but we believe supply side risks are more acute and expect that Brent prices will exceed $80 per barrel in the near term,” Jefferies said.