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China Oil Tariffs to Cost US $1Billion Monthly

Oil prices fell on Monday after China threatened duties on American crude imports in a trade dispute with Washington.Oil prices fell on Monday after China threatened duties on American crude imports in a trade dispute with Washington.

China’s threat to impose duties on US oil imports will hit a business that has soared in the last two years, which is now worth almost $1 billion per month.

In an escalating spat over the United States’ trade deficit with most of its major trading partners, including China, US President Donald Trump said last week he was pushing ahead with hefty tariffs on $50 billion of Chinese imports, starting on July 6, Reuters reported.

China said on Friday it would retaliate by slapping duties on several American commodities, including oil.

Investors expect the spat to come at the expense of US oil firms, pulling down the share prices of ExxonMobil and Chevron by 1-2% since Friday, while US crude oil prices fell by around 5%.

“This escalation of the trade war is dangerous for oil prices,” said Stephen Innes, the head of trading for Asia/Pacific at futures brokerage OANDA in Singapore.

“Let’s hope cooler heads prevail, but I am not overly optimistic.”

The dispute between the United States and China comes at a pivotal time for oil markets.

Following a year and a half of voluntary supply cuts led by the Middle East-dominated Organization of the Petroleum Exporting Countries, as well as the non-OPEC producer Russia, oil markets have tightened and pushed up prices.

The potential drop-off in American oil exports to China would benefit other producers, especially from OPEC and Russia.

A cut in Chinese purchases of US oil may also benefit Iran’s sales, which Washington is trying to curb with new sanctions it announced in May.

“The Chinese may just replace some of the American oil with Iranian crude,” said John Driscoll, director of consultancy JTD Energy Services.

“China is not intimidated by the threat of US sanctions. They have not been in the past. So in this diplomatic spat, they might just replace US crude with Iranian oil. That would obviously infuriate Trump,” he added.

Oil prices fell on Monday after China threatened duties on American crude imports in a trade dispute with Washington, while supply from OPEC and Russia was also expected to rise.

US light crude oil hit a two-month low of $63.59 a barrel before edging back to $64, down $1.06. North Sea Brent was down 36 cents at $73.08 a barrel.

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