A bruising week for oil has set prices on course for the longest weekly losing streak in three years as a trade war between the world’s two biggest economies stokes fears it could sap energy demand.
Futures were headed for a 3.3 percent loss this week. The U.S. and China are threatening to slap additional tariffs on imports from each other in a matter of weeks, with the tit-for-tat protectionist measures set to expand. The trade conflict overshadowed a decline in American crude inventories and potential supply losses from Iran.
Oil is trading near a seven-week low on fears the intensifying trade tension will crimp global economic growth and increase financial vulnerability. Meanwhile, some Iranian crude buyers have started looking elsewhere for supplies as renewed U.S. sanctions aimed at curbing oil exports from the OPEC nation are set to take effect in November.
“Overall, there seems to be a bigger downward force on oil with China’s retaliatory tariffs against the U.S.,” Min Byungkyu, a Seoul-based global market strategist at Yuanta Securities Co., said by phone. “There are still concerns over a possible decline in U.S. oil sales to China as it could disrupt America’s supply balance by increasing its stockpiles and even end up creating a glut.”
West Texas Intermediate crude for September delivery traded at $66.26 a barrel on the New York Mercantile Exchange, down 55 cents, at 8:54 a.m. in London. The contract slipped 13 cents to $66.81 on Thursday. Prices are headed for a sixth weekly decline, the longest such streak since August 2015. Total volume traded was about 15 percent below the 100-day average.
Brent for October settlement fell 54 cents to $71.53 on the London-based ICE Futures Europe exchange. Prices fell 21 cents to $72.07 on Thursday, and are headed for a 2.3 percent drop this week. The global benchmark crude traded at a $5.95 premium to WTI for the same month.
Futures for September delivery fell 1.2 percent to 512.9 yuan a barrel on the Shanghai International Energy Exchange, after losing 0.8 percent on Thursday.
China will apply 25 percent duties on American diesel, gasoline, propane and other petroleum products from Aug. 23, according to the nation’s commerce ministry. The latest levies against an additional $16 billion worth of imports from the U.S. match America’s plan to add 25 percent tariffs on the same value of Chinese goods. Washington is also reviewing 10 percent duties on a further $200 billion in Chinese products.
In the latest list, U.S. crude was spared in a sign that America has become too big to ignore in the oil market. As recently as June, China was the top foreign buyer of American crude, importing a record 15 million barrels that month. The Asian nation may impose duties later if President Donald Trump doesn’t back down, according to Li Li, a research director at ICIS-China.
In the U.S., nationwide crude stockpiles declined by 1.35 million barrels last week, according to the Energy Information Administration, while supplies stored in the key hub of Cushing, Oklahoma, fell for a twelfth straight week. Gasoline inventories expanded for the first time in six weeks, the data showed. — Bloomberg