Oil prices rise, escalating US-China trade war caps gains

CNBC

Reuters
KEY POINTS
  • Brent crude futures climbed 47 cents, or 0.8%, to $60.28 a barrel by 0351 GMT after earlier dipping to $59.07, their lowest since Jan. 14.
  • West Texas Intermediate (WTI) crude futures rose 47 cents, or 0.9%, to $55.16 per barrel.
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Oil pumpjacks in the Permian Basin oil field are getting to work as crude oil prices gain.
Spencer Platt | Getty Images

Brent crude rose on Tuesday, after earlier falling to its lowest since January, as traders betting on falling prices bought back contracts to lock in profits from recent declines caused by the escalating trade dispute between the U.S. and China.

Brent prices have plunged 7.6% since their close on July 31, the day before U.S. President Donald Trump vowed to impose new tariffs on Chinese imports, causing China to retaliate against agricultural imports from the United States, which responded to a decline in the Chinese yuan on Monday by branding the country a currency manipulator later in the day.

Brent fell more than 3% on Monday as traders are concerned the ongoing trade dispute between the world’s two biggest oil buyers will dent demand.

Brent crude futures climbed 47 cents, or 0.8%, to $60.28 a barrel by 0351 GMT after earlier dipping to $59.07, their lowest since Jan. 14.

West Texas Intermediate (WTI) crude futures rose 47 cents, or 0.9%, to $55.16 per barrel.

“The market is back short-covering and there’s also some amount of profit-booking today,” said Sukrit Vijayakar, director of Indian energy consultancy Trifecta, referring to when traders with short positions, or bets on falling prices, buy back futures to lock in profits.

The United States accused Beijing of manipulating its currency after China let the yuan drop to its lowest point in more than a decade. The falling yuan would support Chinese exports by making them cheaper but would raise the cost of oil imports that are priced in dollars. China is the world’s biggest oil importer.

“Oil prices can’t shake off falling demand concerns, as China’s latest escalation with devaluing the yuan and limiting U.S. agricultural purchases derail hopes for a trade deal to be reached this year,” said Edward Moya, senior market analyst at OANDA in New York.

Concerns that the trade conflict has entered a phase of retaliatory action was weighing down on the sentiments in the oil market, which at the moment is taking lesser notice of the Middle East tensions, analysts said.

“Despite the ongoing threat of supply disruption in the Middle East, it is clear that the U.S.-China trade dispute is of more significant concern at the moment,” Stephen Innes, managing partner at VM Markets said in a note.

Iran on Monday said it will no longer tolerate “maritime offences” in the Strait of Hormuz, a day after it seized a second oil tanker near the strategic waterway that it accused of smuggling fuel.

Iran’s seizure of the Iraqi oil tanker had raised some concerns about potential Middle East supply disruptions.

Oil prices may find some support later this week with a preliminary Reuters poll showing U.S. crude oil inventories were expected to fall for an eighth consecutive week.

Oil prices fall as trade tensions hit demand outlook

SINGAPORE/TOKYO (Reuters) – Oil prices fell on Monday amid renewed global economic growth concerns after U.S. President Donald Trump vowed to escalate the trade war with China with more tariffs, which would likely limit fuel demand in the world’s two biggest crude consumers.

Brent crude futures LCOc1 had dropped 92 cents, or 1.5%, to $60.97 a barrel by 0640 GMT.

U.S. West Texas Intermediate (WTI) crude futures CLc1 declined 73 cents, or 1.3%, to $54.93 a barrel.

Both crude benchmarks fell last week, with Brent down 2.5% and U.S. crude falling 1%.

Asian equity markets dropped to a six-month low on Monday while gold prices climbed as investors sought safe-haven assets because of the ratcheting up of the trade dispute between China and the United States, the world’s two largest economies.

“Crude oil futures experienced significant headwinds as global risk appetites remain feeble over subdued global growth and a sudden escalation in the Sino-U.S. trade dispute,” said Benjamin Lu, commodities analyst at Singapore-based brokerage Phillip Futures.

Trump last week said he would impose a 10% tariff on $300 billion of Chinese imports starting on Sept. 1 and said he could raise duties further if China’s President Xi Jinping failed to move more quickly toward a trade deal.

The announcement extends U.S. tariffs to nearly all imported Chinese products. China on Friday vowed to fight back against Trump’s decision, a move that ended a month-long trade truce.

On Monday, China let the yuan tumble beyond the key 7-per-dollar level for the first time in more than a decade, in a sign Beijing may tolerate further currency weakness because of the trade dispute.

The 1.4% drop in the yuan came after the People’s Bank of China (PBOC) set the daily mid-point of the currency’s trading band at its weakest level since December 2018.

A lower yuan would raise the cost of China’s dollar-denominated oil imports. It is the world’s biggest crude oil importer.

Signs of rising oil exports from the United States also pressured prices on Monday. U.S. shipments surged by 260,000 barrels per day (bpd) in June to a monthly record of 3.16 million bpd, U.S. Census Bureau data showed on Friday.

The trade war and rising supply should accelerate the trend of speculators reducing their bullish positions in the WTI futures markets.

Speculators cut bullish wagers on U.S. crude in the week to July 30, while bearish wagers rose to their highest since February, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday

However, speculators increased their bullish positions in Brent futures.

Also in the United States, the weekly oil rig count, an indicator of future production, fell for a fifth week in a row as most independent producers cut spending even though majors were still pushing ahead with investments in new drilling.

Iran’s seizure of an Iraqi oil tanker raised some concerns about potential Middle East supply disruptions in the Gulf. Iran’s state media reported on Sunday the Iranian Revolutionary Guards seized the ship for smuggling fuel.

Reporting by Roslan Khasawneh in SINGAPORE and Aaron Sheldrick in TOKYO; Editing by Joseph Radford and Christian Schmollinger

Oil prices rebound after Trump trade tariffs trigger plunge

CNBC

Reuters
KEY POINTS
  • Brent crude futures rose $1.53, or 2.6%, to $62.03 a barrel by 0220 GMT.
  • U.S. West Texas Intermediate crude futures gained $1.02, or 1.9%, to $54.97 a barrel.
  • Brent crude futures slumped more than 7% on Thursday, their steepest drop in more than three years. U.S. West Texas Intermediate (WTI) crude futures fell nearly 8%, posting its worst day in more than four years.
Reusable CNBC: Oil derrick pump jack Midland Texas west Texas 150825-001
Justin Solomon | CNBC

Oil prices rose more than $1 on Friday, rebounding from their biggest falls in years after U.S. President Donald Trump imposed more tariffs on Chinese imports, intensifying the trade war between the world’s two biggest economies and crude consumers.

Brent crude futures slumped more than 7% on Thursday, their steepest drop in more than three years. U.S. West Texas Intermediate (WTI) crude futures fell nearly 8%, posting its worst day in more than four years.

The collapse ended a fragile rally built on steady drawdowns in U.S. inventories, even as global demand looked shaky because of the trade dispute.

Brent futures rose $1.53, or 2.6%, to $62.03 a barrel by 0220 GMT, while WTI futures gained $1.02, or 1.9%, to $54.97 a barrel.

Trump said on Thursday he would impose a 10% tariff on $300 billion of Chinese imports from Sept. 1 and could raise tariffs further if China’s President Xi Jinping fails to move more quickly to strike a trade deal.

The announcement extends Trump’s tariffs to nearly all of China’s imports into the United States and marks an abrupt end to a temporary truce in a trade war that has disrupted global supply chains and roiled financial markets.

Brent and U.S. crude are heading for their first weekly declines in three, on track for falls of more than 2%.

“Global growth estimates have been under pressure from the tariff war and the move by the U.S. erases all the goodwill gained earlier in the week when U.S. negotiators were in Shanghai to kick start trade talks,” Alfonso Esparza, market analyst at OANDA said in a note.

There have been mounting signs this week of the economic toll of the trade dispute between the United States and China, which reported this week slowing manufacturing activity in July.

U.S. manufacturing activity also slipped last month, dropping to a near three-year low, and construction spending fell in June as investment in private construction projects tumbled to its lowest level in 1-1/2 years.

The economic slowdown has translated into falling oil demand in the United States, the world’s biggest oil consumer.

The amount of crude processed at U.S. oil refineries averaged 17.2 million barrels per day over the past four weeks, down 1.3% from the same time a year ago, U.S. government data showed this week.

Oil falls on worries over growth outlook, positive news on Iran

CNBC

Reuters
KEY POINTS
  • Brent crude futures were down by 23 cents, or 0.4%, at $63.23 a barrel by 0427 GMT. Prices rose 1.6% last week.
  • U.S. West Texas Intermediate crude was down by 9 cents, or 0.2%, at $56.11 a barrel. WTI gained 1% last week.
Reusable: Crude oil refinery Philadelphia Energy Solutions 141024
Getty Images

Oil prices fell on Monday as investors fretted over the outlook for global economic growth, while weekend talks between Iran and major powers ended on a generally positive note, suggesting an easing of tensions in the Middle East.

Brent crude futures were down by 23 cents, or 0.4%, at $63.23 a barrel by 0427 GMT. Prices rose 1.6% last week.

U.S. West Texas Intermediate crude was down by 9 cents, or 0.2%, at $56.11 a barrel. WTI gained 1% last week.

Economic growth in the United States slowed less than expected in the second quarter with a boom in consumer spending, strengthening the outlook for oil consumption.

But growth outside the U.S. is slowing faster, due partly to the impact of the U.S.-China trade war.

“For global growth, the outlook there is looking shakier … it’s not disastrous but it’s not shooting the lights out,” said Phin Ziebell, senior economist at National Australia Bank.

“Where does oil demand fit in a world where it looks like this big boom is now starting to tail off,” he said, pointing also to recent sluggish car sales around the world.

Senior U.S. and Chinese negotiators are meeting this week for the first time since trade talks broke down in May, as they struggle to resolve deep differences. Expectations for progress during the two-day Shanghai meeting are low.

Traders and investors are also focused on meetings of major central banks — including the U.S. Federal Reserve, which is expected to lower interest rates.

An emergency meeting with parties to Iran’s 2015 nuclear deal was constructive but there are unresolved issues and Tehran will continue to reduce its nuclear commitments if Europeans fail to salvage the pact, Iranian official Abbas Araqchi said on Sunday.

The meeting did not include the United States, which pulled out of the agreement in May 2018 and slapped sanctions back on Iranian oil exports.

Still, tensions remain high around the Strait of Hormuz, the world’s most important oil passageway, as Iran refused to release a British-flagged tanker it seized but granted India consular access to 18 Indian crew members.

Denmark welcomed the British government’s proposal for a European-led naval mission to ensure safe shipping through the strait.

The United States is also working on a multinational maritime security initiative in the Gulf.

Oil prices nudge up as geopolitical tensions counter sluggish demand

CNBC

Reuters
KEY POINTS
  • Brent crude futures were up 7 cents, or 0.1%, at $63.46 a barrel by 0457 GMT. They rose 0.3% in the previous session.
  • U.S. West Texas Intermediate crude was 18 cents higher, or 0.3%, at $56.20 a barrel, after gaining 0.25% overnight.
Reusable: Oil storage refinery Australia Caltex Oil 141014
Jason Reed | Reuters

Oil prices edged higher on Friday on worries about Middle East tensions, offset by a flagging global economic growth outlook amid the U.S.China trade war.

Brent crude futures were up 7 cents, or 0.1%, at $63.46 a barrel by 0457 GMT. They rose 0.3% in the previous session.

U.S. West Texas Intermediate crude was 18 cents higher, or 0.3%, at $56.20 a barrel, after gaining 0.25% overnight.

“Growing challenges in the macroeconomic environment have kept bullish bets in check as risk appetites remain soft over potential weakness in global fuel demand,” said Benjamin Lu, commodities analyst at Singapore-based brokerage Phillip Futures.

A global economic growth rut risks deepening, despite expectations that major central banks will cut rates or ease policy further, according to Reuters polls of over 500 economists who remain worried about the U.S.-China trade war.

Increasing pessimism is clear from the latest polls taken July 1-24, which show the growth outlook for nearly 90% of over 45 economies polled was either downgraded or left unchanged. That applied not just to this year but also 2020.

While concerns over Middle East supply disruptions have led to recent price spikes, oil has generally been under pressure from worries about global economic growth amid growing signs of harm from the rumbling Sino-U.S. trade war over the past year.

“Bullish wagers will be held hostage to the soggy global growth outlook,” Stephen Innes, managing partner at Vanguard Markets, said in a note.

A week after Iran seized a British-flagged tanker in the Gulf, Britain has sent a warship to accompany all British-flagged vessels through the Strait of Hormuz, a change in policy announced on Thursday after the government previously said it did not have resources to do so.

U.S. Secretary of State Mike Pompeo said in a television interview on Thursday that he would go to Iran for talks if it was necessary, amid the tensions between Tehran and Washington.