Oil prices fall as US-China trade war clouds demand outlook

Lloyd Doyle
September 19, 2018

Oil markets slipped on Tuesday as the latest escalation in the Sino-US trade war clouded the outlook for crude demand from the two countries, the world's top crude consumers.

U.S. West Texas Intermediate (WTI) crude CLc1 gained 94 cents to settle at $69.85 a barrel, a 1.4 percent increase.

On Monday, the Trump administration said it would begin to levy new tariffs of 10 percent on about $200 billion of Chinese products next Monday, with the tariffs to go up to 25 percent by the end of 2018.

Brent crude, the global benchmark, was up 0.7% to $78.61 a barrel on London's Intercontinental Exchange.

The trade dispute is raising concerns about the potential for slower growth in oil consumption, offsetting supply concerns stemming from the upcoming US sanctions on Iran.

"The market's expectation of shortages has cooled after data from last week showed increases in supplies, while investors have lowered the outlook for oil demand", said Wang Xiao, head of crude research with Guotai Junan Futures.

The tariffs are likely to limit economic activity in both China and the United States, potentially hitting growth in demand for oil as less fuel is consumed to move goods for trade.


Oil futures rose more than 1 percent on Tuesday on signs that OPEC would not be prepared to raise output to address shrinking supplies from Iran, and as Saudi Arabia signaled an informal target near current levels.

Oil prices were little changed on Monday as the market weighed deepening trade tension between the USA and China that is expected to dent global crude demand and potential supply tightening due to Iran sanctions.

Meanwhile, oil output from seven major U.S. shale formations is expected to rise by 79,000 bpd to 7.6 million bpd in October, the U.S. Energy Information Administration said on Monday.

Prices pared gains in post-settlement trade after data from industry group the American Petroleum Institute showed USA crude inventories rose by 1.2 million barrels in the week to September 14 to 397.1 million, compared with analysts' expectations for a decrease of 2.7 million barrels.

United States crude stocks increased by 1.2 million barrels according to the American Petroleum Institute (API), sharply reversing the market forecast of -2.7 million barrels, raising prospects for a widening premium in the Brent versus WTI with crude runs worsening in Europe and Asia. Russia, the world's largest oil producer, and other producers in OPEC have kept in place a supply agreement to maintain prices while at the same time providing enough oil to the market.

"Iran is not only a founding member of OPEC, it's a very important member of this organization", OPEC Secretary-General Mohammed Sanusi Barkindo said.

Yesterday, Russian Energy Minister Alexander Novak said all possible scenarios for oil output could be discussed at a meeting of OPEC and non-OPEC states in Algeria this month.

Other reports by Iphone Fresh

Discuss This Article

FOLLOW OUR NEWSPAPER