Oil fell to near $65 a barrel as traders assessed escalating tensions between the world’s two biggest economies as well as an upcoming OPEC meeting that could see the group lift production.
Futures in New York fell 1.3 percent, erasing gains from Monday. The prospect of a U.S.-China trade war rattled global financial markets as China vowed to retaliate “forcefully” against President Donald Trump’s threat of tariffs on an additional $200 billion in Chinese imports.
The global Brent benchmark pared earlier losses, widening its premium to West Texas Intermediate crude, as Libya said it lost 400,000 barrels a day in output after a militant attack at the Ras Lanuf oil terminal.
Meanwhile, the Organization of Petroleum Exporting Countries is aiming for a modest production boost in a bid to bridge the gap between Russia’s push for a big gain and Iran’s insistence that no change is needed. The possibility of an increase in output, along with concerns about the effects of the U.S.-China trade dispute, have whipsawed crude prices this month as OPEC heads into its next meeting on Friday.
“The issues around trade are going to be problematic for demand,” Jason Gammel, a London-based analyst at Jefferies LLC, said in a Bloomberg Radio interview. “We could see a slowdown in what has been very strong demand growth.”
WTI for July delivery, which expires on Wednesday, earlier fell as much as 1.5 percent to $64.87 a barrel on the New York Mercantile Exchange and traded at $64.99 at 11:17 a.m. in London. The more active August contract was at $64.84 a barrel.
Brent futures for August settlement declined as much as 80 cents before paring those losses to trade at $74.96 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $10.15 premium to WTI for the same month, widening sharply throughout the European morning.
In a White House statement Monday evening, Trump said that he had instructed the U.S. Trade Representative’s office to identify $200 billion in Chinese imports for additional tariffs of 10 percent. China quickly promised to retaliate with “strong” counter measures if America rolls out new duties.
Investors are also awaiting what could be one of the most contentious OPEC meetings in recent history as discussions over whether to increase output heat up. Officials from a number of countries are optimistic that an agreement can be won for a relatively modest hike at this week’s meeting in Vienna, according to people briefed on the talks, who asked not to be named discussing private conversations.
OPEC members are discussing an agreement that delivers 300,000 to 600,000 barrels a day of additional oil supply to global markets over the next few months, according to the people. Iran, which faces renewed U.S. sanctions, on Tuesday reiterated its objections to an output increase, cautioning that oil stockpiles could grow again. — Bloomberg