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

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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.
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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 gains a fifth day after US stockpile drop amid rate optimism

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Reuters
KEY POINTS
  • Brent crude was up 44 cents, or 0.7%, at $65.16 a barrel by 0324 GMT.
  • U.S. West Texas Intermediate crude gained 41 cents, or 0.7%, to $58.46 a barrel.
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Jean-Paul Pelissier | Reuters

Oil prices rose for a fifth day on Wednesday, buoyed by a bigger-than-expected drop in U.S. inventories and as investors awaited a widely expected cut in interest rates by the Federal Reserve, the first in more than 10 years.

Brent crude was up 44 cents, or 0.7%, at $65.16 a barrel by 0324 GMT.

U.S. West Texas Intermediate crude gained 41 cents, or 0.7%, to $58.46 a barrel.

“The market is quite optimistic leading into what the Fed is going to do on interest rates and as a result of that we’ll see more demand,” Jonathan Barratt, chief investment officer at Probis Group in Sydney, said by phone, referring to the widely expected cut.

Central bankers in the United States began their two-day meeting on Tuesday and were expected to lower borrowing costs for the first time since the depths of the financial crisis more than a decade ago.

U.S. consumer spending and prices rose moderately in June, pointing to slower economic growth and benign inflation that cemented expectations of Fed rate cuts.

U.S. President Donald Trump on Tuesday reiterated his call for the Fed to make a large interest rate cut. That would be an unlikely move by the central bankers, Barratt said.

Despite the gains in prices, Brent is set to ease in July due to ongoing worries about demand, heading for a decline of about 2%, while WTI is down 1 cent.

Still, U.S. inventories have been falling in recent weeks suggesting demand concerns are overstated.

Crude stockpiles fell again last week, along with gasoline and distillate inventories, data from industry group the American Petroleum Institute (API) showed on Tuesday.

“There is a definitive seasonal trend emerging as inventory draws continue to beat analysts’ expectations by a mile suggesting analysts have grossly underestimated consumption and the breadth of seasonal demand this year,” VM Markets Pte said in a note.

Crude inventories fell by 6 million barrels in the week ended July 26 to 443 million barrels, compared with analysts’ expectations in a Reuters poll for a decrease of 2.6 million barrels, the API data showed.

If confirmed by U.S. government data on Wednesday morning, the decline would put crude stocks down for a seventh week in a row. That would be longest stretch since they fell for a record 10 consecutive weeks ending in January 2018.

Total crude stockpiles, however, would still be about 3% higher than the five-year average.

Oil prices fall as market awaits G20, OPEC

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Reuters

KEY POINTS
  • Brent crude futures were down 44 cents, or 0.7%, at $66.05 by 0059 GMT.
  • U.S. West Texas Intermediate (WTI) crude futures were down 41 cents, or 0.7%, at $58.97.
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An offshore oil rig off the coast of Norway.
Nerijus Adomaitis | Reuters

Oil fell on Thursday, erasing some of the previous session’s strong gains, as traders eye the G20 summit in Japan and a meeting of OPEC and other oil producers to decide on an extension of output cuts.

Brent crude futures were down 44 cents, or 0.7%, at $66.05 by 0059 GMT.

U.S. West Texas Intermediate (WTI) crude futures were down 41 cents, or 0.7%, at $58.97.

Oil prices rose more than 2% on Wednesday and hit their highest in about a month, buoyed by U.S. government data showing a larger-than-expected drawdown in crude stocks as exports hit a record high and surprise drops in refined product stockpiles.

However, traders said concerns that a hoped-for breakthrough on trade at the G20 may not eventuate and some nervousness about continued output cuts were crimping follow-through buying.

“I think the length of the speculative positioning might be stretched too tight ahead of G20 and of course OPEC,” said Stephen Innes, managing partner at Vanguard Markets in Bangkok, said.

U.S. President Donald Trump will meet with Chinese President Xi Jinping at the Group of 20 summit that starts on Friday in Osaka, Japan to seek a breakthrough in negotiations to end a trade war that has been hitting global economic growth.

Trump said on Wednesday that a deal was possible but also spoke of a Plan B that would involve reducing business ties with China.

“With Trump stirring up trade war dust via “Plan B” there is still that element of the unknown,” Innes said.

Almost immediately after the G20 summit ends on Saturday, the Organization of the Petroleum Exporting Countries (OPEC) meets on Monday to discuss an extension of production cuts to support prices.

The day after that OPEC members meet with other producers including Russiain a grouping known as OPEC+, which agreed in December to reduce supply by 1.2 million barrels per day from Jan. 1. The agreement is due to expire on June 30.

Crude inventories in the United States, the largest producer and consumer of oil, fell 12.8 million barrels last week, the Energy Information Administration said, far surpassing analyst expectations for a decrease of 2.5 million barrels.

That was the most since September 2016, according to the statistical arm of the Department of Energy.

Net U.S. crude imports fell last week by 1.2 million barrels per day (bpd). Overall crude exports rose to 3.8 million bpd, beating the previous record of 3.6 million bpd in February.

Oil prices climb as Middle East tensions simmer

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Reuters

KEY POINTS
  • Brent futures were up 25 cents, or 0.4%, at $65.45 a barrel by 0325 GMT.
  • West Texas Intermediate crude was up 37 cents, or 0.6%, at $57.80 a barrel.
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A pump jack operates at a well site leased by Devon Energy Production Co. near Guthrie, Oklahoma.
Nick Oxford | Reuters

Oil prices climbed on Monday as tensions remain high between Iran and the United States, with U.S. Secretary of State Mike Pompeo saying “significant” sanctions on Tehran would be announced.

Brent futures were up 25 cents, or 0.4%, at $65.45 a barrel by 0325 GMT.

West Texas Intermediate crude was up 37 cents, or 0.6%, at $57.80 a barrel.

U.S. President Donald Trump said last week that he called off a military strike to retaliate for Iran’s downing of an unmanned U.S. drone, and he said on Sunday that he was not seeking war with Iran.

But Pompeo also said “significant” sanctions on Iran would be announced on Monday aimed at further choking off resources that Tehran uses to fund its activities in the region.

“The Middle East clashes should support oil prices at the start of the week as crude markets will wait to see Iran’s response to the threat of additional sanctions, ” said Edward Moya, senior market analyst at OANDA in New York.

Oil prices surged last week after Iran shot down a drone that the United States claimed was in international airspace and Tehran said was over its territory.

Amid the escalating tensions, Brent racked up a gain of about 5% last week, its first weekly gain in five weeks, and WTI jumped about 10%, its biggest weekly percentage gain since December 2016.

Trump said he had aborted a military strike on Iran because such a response to Tehran’s downing of the unmanned U.S. surveillance drone would have caused a disproportionate loss of life.

Iranian officials told Reuters that Tehran had received a message from Trump through Oman overnight warning that a U.S. attack on Iran was imminent.

“We’re prepared to negotiate with no preconditions,” Pompeo told reporters on Sunday. “They know precisely how to find us. I am confident that at the very moment they’re ready to truly engage with us we’ll be able to begin these conversations. I’m looking forward to that day.”

Meanwhile, U.S. energy companies last week increased the number of oil rigs operating for the first time in three weeks.

Companies added one oil rig in the week to June 21, bringing the total count to 789, Baker Hughes said in a closely followed report on Friday.