China Trade Battle Heats Up = Are Beijing Tariffs on US Crude Next?

Jeannie Matthews
July 10, 2018

Renewed U.S. sanctions on Iran against its oil exports look to tighten supply further.

U.S. crude was bullish after official data on Thursday showed inventories at Cushing, the delivery point for United States crude futures, fell to their lowest in three-and-a-half years.

"This allows investors to respond to policy changes and price movements in volatile energy markets, which occur mostly in the European or United States time zones".

The move came as Seoul started negotiations with Washington to seek authorizations over buying Iranian oil, in line with a waiver it received during previous sanctions, the report added.

Conflicting opinions over what will happen to crude supplies in the near future, coupled with concern over the escalating trade war between the US and China, was appropriately matched by mixed market performance for crude on Friday, with the USA benchmark achieving modest price gains and the global benchmark slipping slightly. Global benchmark Brent was down 23 cents, at $77.16/Bbl by 2:29 p.m.

US crude futures gained 86 cents, or 1.2 percent, to settle at $73.80 a barrel.

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Earlier this month, Reuters also reported that South Korea had upped crude oil imports from Kazakhstan, already looking for alternative supplies as the November 4 deadline for the sanctions draws nearer.

The rally appears to be a "short covering situation - we were down nearly 2% yesterday", said Yawger, Reuters reported.

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Looming larger over markets is the U.S./China trade dispute.

US markets also garnered support from a government employment report showing better-than-expected growth in jobs.

Shares of top oil marketing companies led the gains on NSE index, as US-China trade war fears weighed on oil prices.

"The Korean government is negotiating with the United States to get exemptions from the restrictions on Iranian oil purchases", it said.

Energy consultancy FGE this week issued a stark warning of looming supply shortages due to USA sanctions against Iran and also because of disruptions elsewhere. Saudi Arabia had earlier reported to the Organization of the Petroleum Exporting Countries that they had pumped 10.488 million bpd in June, up by 458,000 bpd from their self-reported figure for May, OPEC sources told Reuters.

The West Texas Intermediate for August delivery rose 0.86 USA dollar to settle at 73.80 dollars a barrel on the New York Mercantile Exchange, while Brent crude for September delivery fell 0.28 dollar to close at 77.11 dollars a barrel on the London ICE Futures Exchange.

Two other sources said South Korea cancelled July loadings of crude and condensate cargoes from Iran as it was uncertain whether the country would receive an exemption from USA sanctions on Iran trade.

Saudi Arabia told Opec that it increased production by nearly 500,000 barrels per day last month.

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