OMCs gain as US-China trade war fears weigh on oil prices

09 Julio, 2018, 16:51 | Author: Arnold Perez
  • Crude Oil

International Brent crude oil futures were at $77.18 per barrel at 0043 GMT, down 21 cents, or 0.3 percent, from their last close.

Official data that came out on Thursday, a day later than normal due to the July 4 public holiday, showed inventories at Cushing, the delivery point for USA crude futures, fell to their lowest in three-and-a-half years.

Oil markets opened cautiously lower on Friday ahead of a raft of import tariffs set to be imposed later in the day by the world's two biggest economies, the United States and China.

Washington put the tariffs in place on Chinese goods from 12.01am Washington DC time (4.01am GMT) on Friday.

"We expect the Chinese government to impose tariffs on (U.S.) crude", the executive said, declining to be named as he was not authorised to speak to media.

"The Chinese have to do the tit-for-tat, they have to retaliate", said John Driscoll, director of consultancy JTD Energy, adding that cutting USA crude imports was a means "of retaliating (against) the U.S.in a very substantial way".

An executive from China's Dongming Petrochemical Group said he expected Beijing to soon impose the tariff on U.S. oil imports.

He added that his refinery had canceled US crude imports and would switch to Middle East or West African supplies instead.

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Oil prices are likely to be weighed down by the trade conflict as investors are concerned about the impact of the tariffs and counter tariffs on global economic growth, analysts said.

Traders are paying attention to the escalating trade dispute between the United States and China although the current products caught in the tariff war are not energy-related.

Energy consultancy FGE this week issued a stark warning of looming supply shortages due to US sanctions against Iran and also because of disruptions elsewhere.

"Iran's exports are some 2.7-million barrels a day, including condensate", it noted.

Even if the U.S. government grants some waivers to allies, FGE estimated 1.7 million to 2 million bpd of crude and condensate would be cut out of markets once its sanctions are implemented. The US rig count, an early indicator of future output, was up by five in the week to July 6, according to General Electric Co's Baker Hughes energy services firm.

"At the same time, Venezuela can do nothing to stop its own production decline and will lose another 400,000 bpd by year-end with production going to below 1 million bpd", FGE said, adding that another 300,000 bpd of Libyan capacity was disrupted.

Although Saudi Arabia and Russian Federation have said they would raise output to make up for disruptions, FGE said "there simply is not enough capacity to make up for Iran's crude losses, plus Venezuela and Libya", and warned of the possibility of oil prices rising to $100 per barrel.

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