Oil Set for Sixth Weekly Loss as Trade War Stokes Demand Fears

(Bloomberg)

Oil was poised for a sixth weekly loss in New York, the longest run of declines in three years, as a trade war between the world’s two biggest economies stokes fears of weaker growth in energy demand.

Futures were headed for a 2.5 percent loss this week. The U.S. and China are threatening to slap additional tariffs on imports from each other in a matter of weeks, with the tit-for-tat protectionist measures set to expand. At the same time, fears about global oil supplies have receded after producers pumped more, according to the International Energy Agency.

Oil is trading near a seven-week low on fears the intensifying trade tension will crimp global economic growth and increase financial vulnerability. Supply fears could still return to the fore later this year due to U.S. sanctions on Iran, the IEA said, with some crude buyers already looking elsewhere for supplies before the restrictions take effect in November.

“The economic uncertainty stemming from the escalating trade dispute and the ensuing reduction in risk appetite could have reinforced the impact of bearish supply fundamentals,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London.

West Texas Intermediate crude for September delivery traded at $66.76 a barrel on the New York Mercantile Exchange, down 5 cents, at 11:20 a.m. in London. The contract slipped 13 cents to $66.81 on Thursday. Prices are headed for the longest run of weekly declines since August 2015. Total volume traded was about 8 percent below the 100-day average.

Brent for October settlement rose 7 cents to $72.14 on the London-based ICE Futures Europe exchange. Prices dropped 21 cents to $72.07 on Thursday, and are headed for a 1.5 percent drop this week. The global benchmark crude traded at a $5.98 premium to WTI for the same month.

China will apply 25 percent duties on American diesel, gasoline, propane and other petroleum products from Aug. 23, according to the nation’s commerce ministry. The latest levies against an additional $16 billion worth of imports from the U.S. match America’s plan to add 25 percent tariffs on the same value of Chinese goods. Washington is also reviewing 10 percent duties on a further $200 billion in Chinese products.

The latest list spared U.S. crude, a sign that America has become too big to ignore in the oil market. As recently as June, China was the top foreign buyer of American crude, importing a record 15 million barrels that month. The Asian nation may impose duties later if President Donald Trump doesn’t back down, according to Li Li, a research director at ICIS-China.

Oil-market news:

The Trump administration forecasts that it will persuade countries to cut Iranian oil imports by as much as 1 million barrels a day when it reimposes energy sanctions in early November, according to two people familiar with the efforts to choke off Tehran’s crude sales. A price war is brewing between top oil producers in the Middle East, and the U.S. sanctions may be at the heart of it. Crude has decoupled from the currencies of Russia, Brazil and Canada, with internal market dynamics pushing them in different directions, according to research from Societe Generale SA. Energy explorers are looking to public markets to expand pipeline networks in the biggest American oil field as shipping bottlenecks threaten to curtail production in the prolific shale region.