After plummeting more than 3 percent on Wednesday, oil prices steadied early on Thursday, but still traded close to their seven-week low as the U.S.-China trade war is escalating and currently trumping fears of a significant Iranian supply loss later this year.
At 7:25 a.m. EDT on Thursday, WTI Crude was trading down 0.12 percent at $66.86, while Brent Crude was up 0.17 percent at $72.40, holding steady after a 3-percent plunge yesterday, when China and the United States traded a new round of tariffs and counter-tariffs on US$16 billion worth of each others' imports, with China slapping tariffs on 333 U.S. goods, including petroleum products. China, however, removed crude oil from the list of products up for tariffs beginning on August 23.
Despite China backing off crude oil import tariffs for now, the escalating trade war has traders and investors worried that not only it could drag crude trade in the dispute, but also slow down economic growth in the two biggest economies in the world, which in turn could affect global oil demand and demand for other commodities.
The EIA weekly inventory report on Wednesday was also more on the bearish side, despite a draw of 1.4 million barrels of crude oil for the week to August 3.
Some analysts had expected a larger draw, of more than 3 million barrels. Gasoline inventories added 2.9 million barrels last week, the EIA said, against expectations for a drop of 1.7 million barrels in a Reuters poll. Related: Why Saudi Oil Production Suddenly Dropped
While the trade war and the U.S. inventories report dragged oil prices down on Wednesday, for the coming months, investors, traders, and analysts expect the return of the U.S. sanctions on Iran to continue keeping a floor under the price of oil.
"The impact of it is the greatest known unknown of the year. If worst comes to worst and 1.5-2 million bpd of Iranian disappears from the market ... calculations will go out of the window and oil bears will have to brace themselves for a very rough ride," PVM Oil Associates analyst Tamas Varga told Reuters.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More