Oil falls on trade fears after Trump tariff threat

Irving Hamilton
July 11, 2018

"We're very confident that we'll be able to do that without market disruptions and working closely with the Saudis and other oil producing nations to make sure that we have a well-supplied oil market". USA crude fell $1.29 to $72.82 a barrel by 10:53 a.m. ET while Brent crude dropped $1.92 to $76.94 a barrel.

The decline in overall inventories was partially due to a fall-off in stocks at the Cushing, Oklahoma, delivery hub for USA crude futures, which were down by 2.1 million barrels. That dropped overall crude inventories, not including the US strategic reserve, to 405.2 million barrels.

The spectre of tariffs on a further $200 billion of Chinese goods sent commodities lower along with stock markets, as tension between the world's biggest economies intensified.

"Trade concerns have bitten today", said Michael McCarthy, chief markets strategist at CMC Markets. China is a top buyer of USA crude, and has said it could tax US oil if trade tensions escalate.

Oil prices climbed toward a 3½-year high Tuesday, supported by supply issues across several major producing countries and continued uncertainty on the extent USA sanctions on Iran will curb the Middle Eastern country's exports.

The bank also said the likelihood of Saudi Arabia increasing exports to the United States in the coming months could likely weaken the strong WTI backwardation.

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"Libyan relief changes the conversation about spare capacity", said John Kilduff, a partner at Again Capital Management.

Buyers including Syria, India, China and Turkey are expected to remain customers, despite the U.S.'s desire to reduce Iran's exports to zero, Mr. Khoman added.

British bank Barclays on Tuesday raised its outlook for oil prices for this year and next amid expectations of lower supply from Libya and Iran. Concerns about a lack of spare capacity had led crude to rally.

Washington had previously said countries must halt all imports of Iranian oil from November 4 or face USA financial restrictions, with no exemptions.

Saudi Arabia, fellow members of the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russian Federation agreed last month to increase output to dampen price gains and offset global production losses in countries including Libya. Higher gas prices can leave US households with less money to spend on other products.

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