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Crude Prices Drop on US-China Tariff War

Crude Prices Drop on US-China Tariff WarCrude Prices Drop on US-China Tariff War

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 a further $100 billion worth of imports from China, escalating tensions with Beijing, CNBC reported.

Brent crude for June delivery slid down 45 cents, or 0.66%, at $67.88 per barrel. US West Texas Intermediate crude for May delivery was down 41 cents, or 0.65%, at 63.13 a barrel.

Shanghai September crude futures were untraded due to public holidays in China, after falling 0.8% on Wednesday. Shanghai trading will resume on Monday.

While oil market watchers were wary of the brewing trade war between the United States and China, they did not expect to see steep falls amid signs of tightening supplies.

“As the escalating trade tensions continue to weigh on the commodity sector, we view the oil market as the best sector in which to wait out the volatility,” analysts at ANZ bank said in a note.

“Supply-side issues amid a backdrop of falling inventories should override any concern over weaker economic growth.”

The Energy Information Administration reported a 4.6-million-barrel draw in US crude inventories last week, compared with analysts’ expectations for an increase of 246,000 barrels.

 “US oil inventories remain a volatile gauge, but they still provide a good litmus test for the short-term,” said Stephen Innes, the head of trading for the Asia-Pacific region at futures brokerage OANDA in Singapore.

Meanwhile, Saudi Arabia said on Thursday it would raise its official selling price for May crude for Asian customers.

The Organization of 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 to clear a global overhang and support prices.

Saudi Arabia has said production cuts could be extended in one form or another.

"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 Mohammed al-Sada told Reuters.

 

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