Oil falls to two-week low as China retaliates in U.S. trade war

By Grant Smith on 4/4/2018

LONDON (Bloomberg) -- Oil fell after China said it would levy tariffs on $50 billion of U.S. imports in retaliation against measures by President Donald Trump, fanning concerns that economic growth and fuel demand could be hurt.

Futures in New York slipped as much as 2.1% to the lowest intraday price since March 20. China’s Ministry of Commerce said it would levy 25% tariffs on imports of 106 U.S. products including automobiles and aircraft. That wiped out earlier support for prices as OPEC’s output dropped to the lowest in a year in March.

“It’s only logical to see profit-taking in light of looming trade tensions and possible financial market turbulence,” said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt.

Global equities sank after China unveiled its charges, which match the scale of proposed U.S. tariffs announced earlier this week and ratchets up tension in a brewing trade war between the world’s two largest economies. With products ranging from gas turbines to steel and aluminum affected, the spat threatens to raise costs, slow economic growth and hit oil demand.

WTI for May delivery was at $62.38/bbl on the New York Mercantile Exchange, down $1.13, after rising $0.50 on Tuesday. Total volume traded was 12% above the 100-day average.

Brent for June settlement lost $1.11 to $67.01/bbl on the London-based ICE Futures Europe exchange, after adding $0.48 on Tuesday. The global benchmark crude traded at a $4.62 premium to June WTI.

In the U.S., crude stockpiles unexpectedly fell 3.28 MMbbl last week, the API was said to report. That would be the biggest drop since January if confirmed by the EIA’s data Wednesday. Inventories are forecast to have risen by 2 MMbbl, according to a Bloomberg survey.

Oil Market News

Gasoline futures dropped 1.2% to $1.95/gal after rising 0.4% Tuesday. Exxon Mobil almost doubled the amount of crude it expects to pump from recent discoveries off the coast of Guyana as the company amplifies its focus on South American drilling. OPEC and its allies have removed 85% of oversupply and are seeking ways to cooperate after the agreement ends, UAE Energy Minister Suhail Al Mazrouei said.

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