Oil prices slip as US threatens more tariffs on Chinese goods

oil prices
Oil prices teetered between slight gains and small losses on Monday as investors grew more concerned about the ongoing and growing trade war between the Trump administration and Beijing, however, looming US sanctions on Iranian crude exports underpinned the market.  Repsol photo.

Investors are growing more concerned about the ongoing and growing trade war between the Trump administration and Beijing, though looming US sanctions on Iranian crude exports continue to support the market.  Repsol photo.

Oil prices weighed down by falling stock indexes

Oil prices teetered between slight gains and small losses on Monday due to increased trade tensions between the United States and China, but losses were limited due to concerns about the global supply of crude as the Trump administration’s deadline for the re-imposition of sanctions against Iranian crude exports nears.

By 1 p.m., EDT, Brent crude futures slipped 27 cents to $77.82/barrel and US West Texas Intermediate crude futures fell 35 cents to $68.64/barrel.

It is expected that on Monday, US President Donald Trump will announce new tariffs on about $200 billion worth of Chinese goods, according to a senior administration official who spoke to Reuters on Saturday.

The news of the new tariffs and anticipated retaliatory reaction from China resulted in broadly falling US stock indexes on Monday which dragged down oil futures.

Increased trade tensions are boosting concerns about the possibility of a slowdown in growth of oil consumption.

“The uncertainty surrounding the trade war is definitely something the market is concerned about in the short-term,” Phil Flynn, an analyst at Price Futures Group told Reuters.

However, the Beijing-Washington trade war has offset some concerns about the global supply of crude as the Trump administration’s sanctions on Iranian crude exports near.

On November 4, the crippling sanctions on the Iranian oil industry will be re-imposed.  In recent weeks, Iranian crude exports have dropped and oil export loadings are down by 580,000 barrels per day in the past three months, according to Bank of America Merrill Lynch analysts.

“We believe that the full effect of the Iranian oil sanctions has yet to be seen and we feel that the next 5-6 week anticipatory phase of the official sanctions will associate with steady speculative buying interest,” Reuters reports Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

Washington is hoping exports of Iranian crude will fall to zero after the sanctions are re-imposed.

According to Reuters, since the spring when Trump announced he was abandoning the 2015 Iranian nuclear agreement signed by former President Barack Obama, crude traders have priced in a risk premium which reflects anticipated crude supply shortages due to the sanctions.

Iran is OPEC’s third largest producer.

On Friday, US Energy Secretary Rick Perry told Reuters that he does not expect any spikes in oil prices.  Perry said that Saudi Arabia, the US and Russia can boost their output to match Iranian supply losses.

 

 

 

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