China Tariffs on U.S. Crude Not Game-Changing Event
10 August, 2018, 14:46 | Author: Corey Lynch
Benchmark U.S. crude oil lost 26 cents to $66.68 a barrel in electronic trading on the New York Mercantile Exchange.
Brent crude futures fell $2.73 to $71.92 a barrel, a 3.7 percent loss, by 12:33 p.m. EDT (1633 GMT). Helping to underpin prices is the first round of USA sanctions against Iran which came into effect earlier in the week.
All the Persian Gulf oil exporters such as Saudi Arabia, Iran, Iraq, Kuwait, Qatar, the UAE, and Bahrain, ship their crude oil to the worldwide market through the Strait of Hormuz. USA refineries produced about 9.9 million barrels of gasoline a day last week, down by about 600,000 barrels compared to the prior week.
On the 4 hour chart, crude oil is crossing above a solid resistance level of $69.45.
Other than the four key importers, the European Union has said it will not enforce U.S. sanctions which are to be imposed on Iran's oil and banking sectors on November 4.
Jameel Ahmad, global head of currency strategy and market research at FXTM, said the escalation "is just reminding investors that their trade war concerns are going nowhere anytime soon".
"Fears of the impact of sanctions on China, Iran, Russia and Turkey did not help and another big drop in US gasoline demand has some anxious that U.S consumers were showing resistance to higher pump prices", Phil Flynn, a market analyst at the PRICE Futures Group in Chicago, said in a daily emailed market report.
Crude oil continues to rise bullish as traders remained anxious over revived US sanctions against major crude exporter Iran. If more oil leaves the market than expected then the bulls will win the supply/demand battle.
"Oil had been largely immune from the escalating trade dispute, however the recent application of tariffs by China on United States petroleum products does represent a step change for the energy market", said Daniel Hynes, a Sydney-based analyst at Australia & New Zealand Banking Group Ltd.
U.S. economic sanctions against Iran took effect this week.
Meanwhile, stockpiles of gasoline and distillates, which include diesel and heating oil, rose more than expected.
Furthermore, oil prices were dragged down by the increasing output of the Organization of the Petroleum Exporting Countries (OPEC) and Russian Federation. "Unless Iranianoil output falls dramatically, we won't change our view that the Gulf economies will experience a modest recovery over the coming quarters", they said. An earlier report from industry group the American Petroleum Institute had suggested inventories fell by 6 million barrels.
Week over week, USA crude oil exports rose by 540,000 barrels a day, and US production dipped by 100,000 barrels a day to 10.8 million barrels.
Exports to Japan surged to a seven-month high as refiners rushed to secure as many cargoes as possible before United States sanctions are re-applied.
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