LONDON, April 7, (RTRS): Oil prices fell on Friday after US President Donald Trump’s threat of new tariffs on China reignited fears of a trade war between the world’s two biggest economies.
Trump said on Thursday he had ordered US trade officials to consider tariffs on an extra $100 billion of imports from China, escalating tensions with Beijing.
“There is a risk for oil prices that China uses the bazooka option it has on US crude oil exports. China is the main importer (after Canada) of US crude oil, to the tune of about 400,000 barrels per day,” Petromatrix said.
“If China was to impose counter tariffs on US crude, it would become quickly very heavy for the US supply and demand picture, resulting in US crude oil price pressure that would have a negative impact on global oil prices.”
Brent crude for June delivery briefly traded flat at 1322 GMT at $68.33 per barrel after falling as much as 66 cents earlier.
US West Texas Intermediate crude for May delivery erased some of its previous losses, but was still down 15 cents at $63.39 a barrel.
Both are headed for their biggest weekly fall since early March.
Giving some support to prices, the Energy Information Administration (EIA) reported a 4.6-million-barrel draw in US crude inventories last week, compared with analysts’ expectations for an increase of 246,000 barrels.
But bearish sentiment lingered.
“Any meaningful change to the perception regarding future trade issues will most likely trump the potential effects of short-term variations to oil fundamentals,” JBC said.
Meanwhile, Asian oil traders were struggling to understand how Saudi Arabia derived its official selling prices for May after it unexpectedly raised the price for its flagship Arab Light crude sold to Asian refiners.
The Organization of the Petroleum Exporting Countries and some non-OPEC producers including Russia are committed to cutting output by around 1.8 million barrels per day through the end of 2018 in a bid to clear a global overhang and support prices.
Russia said its cooperation with OPEC might become an indefinite arrangement.
OPEC and its allies should keep the cuts to ensure healthy price levels as a way to boost investment in the industry and avoid a supply and price shock in the long run, Qatar’s energy minister said.
Shanghai crude futures trading will resume on Monday after public holidays in China.
Meanwhile, gold rose on Friday, erasing earlier losses, after weaker than forecast US payrolls data knocked the dollar lower and as concerns over the prospect of a US-China trade war kept the metal on track for a narrow weekly gain.
The US currency fell versus the euro and Wall Street stock futures added to losses after the report showed that the US economy created the fewest jobs in six months in March, easing concerns over aggressive interest rates hikes.
Spot gold was at $1,333.44 an ounce at 1325 GMT, up 0.6 percent and off an earlier low of $1,321.16. US gold futures for June delivery were 0.7 percent higher at $1,337.30 an ounce.
Spot prices are up 0.7 percent since last Friday, but are well off their highs for the week. Prices rose on Monday on concerns over the prospect of a China-US trade war before dropping to a one-week low by Thursday after both countries signalled a willingness to negotiate.
“The payrolls report has provided a small boost to gold, but overall it’s had quite a dismal week,” Saxo Bank’s head of commodity strategy Ole Hansen said. “(Gold) has really been struggling to get anything out of the heightened tensions we’ve seen on the trade front.”
“It’s also been a week where the dollar has shown its teeth a bit, bond yields have moved a tad higher and stocks at this stage are still trading up on the week. That has been a counter to the underlying geopolitical uncertainty we’re seeing.”
US President Donald Trump said late on Thursday that he had instructed US trade officials to consider $100 billion in additional tariffs on China, fuelling an already heated dispute between the world’s two biggest economies.
On Friday the United States also sanctioned 24 Russians, including oligarchs and government officials, and 14 groups over what it called a range of malign activities by Moscow to subvert Western democracies, the Treasury Department said.
Among other precious metals, silver was up 0.8 percent at $16.49 an ounce, while platinum was 0.7 percent lower at $915.90 an ounce.
Palladium was up 0.2 percent at $906.90 an ounce, after 10 successive sessions of losses. The autocatalyst metal is still on track to end the week down nearly 5 percent. “Last year’s uptrend has reversed and palladium prices are down more than 20 percent from their January high,” Julius Baer said in a note. “We see them better aligned with a softer global car market and shift our view to neutral.”