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 prices rise amid expectations that the US Federal Reserve will cut rates

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Reuters
KEY POINTS
  • Brent crude rose 33 cents, or 0.5%, to $64.04 a barrel by 0435 GMT, after gaining 0.4% the previous session.
  • U.S. crude was up 30 cents or 0.5%, at $57.17 a barrel, having risen 1.2% on Monday.
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Dan Riedlhuber | Reuters

Oil prices rose for a fourth day on Tuesday on optimism the U.S. Federal Reserve will this week cut interest rates for the first time in more than ten years, which should support economic and fuel demand growth in the world’s biggest oil user.

Brent crude rose 33 cents, or 0.5%, to $64.04 a barrel by 0435 GMT, after gaining 0.4% the previous session.

U.S. crude was up 30 cents or 0.5%, at $57.17 a barrel, having risen 1.2% on Monday.

So-called dovish monetary policy in the United States, where the central bank reduces interest rates, would “support a continuation in global expansionary activities and fuel demand growth” for the second half of 2019, Benjamin Lu, an analyst at Phillip Futures in Singapore, said in a note.

“If the Fed is a little more dovish and prices in a 75 basis points cut … we might see oil pushing up towards $60,” Lu said by phone, referring to U.S. crude.

Still, “demand side concerns are the shadow over oil prices,” he added.

U.S. central bankers will begin their two-day meeting later on Tuesday and are expected to lower borrowing costs for the first time since the depths of the financial crisis more than a decade ago.

U.S. President Donald Trump said a small rate cut “is not enough.”

Economic growth in the United States slowed less than expected in the second quarter, strengthening the outlook for oil consumption but, elsewhere, disappointing economic data has increased concerns about slower growth.

U.S. and Chinese negotiators meet this week for their first in-person talks since agreeing to a truce to their trade dispute at the Group of 20 meeting last month, with some optimistic that the discussions will help bridge the gap between the world’s two largest economies and biggest oil consumers.

However, Trump said China might not want to sign a trade deal until after the 2020 U.S. election.

Supply risks are still a concern as tensions remained high around the Strait of Hormuz, through which about a fifth of the world’s oil passes.

Tensions spiked between Iran and the West after Iranian commandos seized a British-flagged oil tanker in the Gulf this month in apparent retaliation for the capture of an Iranian tanker by British forces near Gibraltar.

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

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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.
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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

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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.
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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.

Oil edges higher on US inventory decline, escalating Middle East tensions

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Reuters
KEY POINTS
  • Brent crude futures were up 20 cents, or 0.3%, at $64.03 a barrel by 0300 GMT, after rising nearly 1% on Tuesday.
  • U.S. West Texas Intermediate crude were up 23 cents, or 0.4%, at $57.00 a barrel, having risen about 1% in the previous session.
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A Petrobras oil platform floats in the Atlantic Ocean near Guanabara Bay in Rio de Janeiro.
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Oil prices edged higher on Wednesday, extending gains as rising tensions with Iran fueled concerns about supply disruptions and as U.S. inventory data showed a much bigger than expected drop in crude stockpiles.

Brent crude futures were up 20 cents, or 0.3%, at $64.03 a barrel by 0300 GMT, after rising nearly 1% on Tuesday.

U.S. West Texas Intermediate crude were up 23 cents, or 0.4%, at $57.00 a barrel, having risen about 1% in the previous session.

U.S. crude stocks fell more than expected in the week to July 19, declining by 11 million barrels to 449 million, the trade group American Petroleum Institute said on Tuesday.

That compared with analysts’ expectations of a decrease of 4 million barrels.

Crude stocks at the Cushing, Oklahoma, delivery hub fell by 448,000 barrels, although gasoline stocks rose by 4.4 million barrels, compared with analysts’expectations in a Reuters poll for a 730,000-barrel decline.

The U.S. government’s official figures are due Wednesday morning.

The potential for renewed Sino-U.S. trade talks also helped bolster prices, analysts said.

White House economic adviser Larry Kudlow on Tuesday called it a good sign that top U.S. officials would be travelling to China to discuss reviving stalled trade talks.

“The possible nearing of a trade deal provided a strong bid for risky assets, lifting oil to its third consecutive gain,” Edward Moya, senior market analyst at OANDA in New York, said in a note.

Meanwhile, signs of rising tensions in the Middle East offset a weaker global growth outlook from the International Monetary Fund, which had kept prices largely flat for much of Tuesday’s session.

A U.S. Navy ship took defensive action against a second Iranian drone in the Strait of Hormuz last week, but did not see the drone go into the water, the U.S. military said on Tuesday.

“We are confident we brought down one drone, we may have brought down a second,” General Kenneth McKenzie told CBS News in an interview.

Iran last week said it had no information about losing a drone.

Also fueling tensions, Britain gained initial support from France, Italy and Denmark for its plan for a European-led naval mission to ensure safe shipping through the Strait of Hormuz following Iran’s capture of a British-flagged tanker.

“Britain’s request, rather than Washington’s, makes it easier for Europeans to rally round this,” one senior EU diplomat said. “Freedom of navigation is essential, this is separate from the U.S. campaign of maximum pressure on Iran.”