Oil fell below $65 a barrel as traders assessed escalating tensions between the world’s two biggest economies as well as an upcoming OPEC meeting that could see the group lift production.
Futures in New York fell 1.4 percent, erasing gains from Monday. The prospect of a U.S.-China trade war rattled global financial markets as China vowed to retaliate “forcefully” against President Donald Trump’s threat of tariffs on an additional $200 billion in Chinese imports.
The global Brent benchmark declined at a slower pace, widening its premium to West Texas Intermediate crude, as Libya said it lost 400,000 barrels a day in output after a militant attack at the Ras Lanuf oil terminal.
The possibility of an increase in OPEC output, coupled with concerns about the effects of the U.S.-China dispute on demand, have weighed on crude prices this month in the run-up to the Vienna summit. The Organization of Petroleum Exporting Countries now appears to be aiming for a modest production boost to bridge the gap between Russia’s push for a big ramp-up and Iran’s insistence that no change is needed.
“Somewhere in the 300,000-600,000 barrel-a-day range is achievable in the third quarter,” Jason Gammel, a London-based analyst at Jefferies LLC, said in a Bloomberg Radio interview. “I think you will see those barrels coming into the market incrementally from the Saudis, Russians and a couple of others.”
WTI for July delivery, which expires on Wednesday, fell as much as 1.9 percent to $64.58 a barrel on the New York Mercantile Exchange and traded at $64.92 as of 8:46 a.m. local time. The more active August contract was at $64.73 a barrel.
Brent futures for August settlement declined as much as 80 cents to $74.54 a barrel on the London-based ICE Futures Europe exchange, before trading at $74.98. Brent’s premium to WTI for the same month was at $10.24, widening sharply through the European morning.
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In a White House statement on Monday evening, Trump said he had instructed the U.S. Trade Representative’s office to identify $200 billion in Chinese imports for additional tariffs of 10 percent. China quickly promised to retaliate with “strong” counter measures if America rolls out new duties.
Other oil-market news:
OPEC member Iran reiterated its objections to an output increase, cautioning that oil stockpiles could grow again. Russia said it still sees a 1.5 million-barrel-a-day output boost as reasonable. In the U.S., crude inventories probably fell by 3 million barrels last week, according to a Bloomberg survey of analysts before Energy Information Administration data on Wednesday. Saudi Arabia’s crude exports jumped in the first half of June, initial vessel-tracking and fixture data compiled by Bloomberg show. Angolan crude exports will fall to a record low of 1.33 million barrels a day in August, according to an official preliminary loading program.
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