Reports of a new policy paper published by the Chinese government pushed oil prices lower in Asian trade this morning, dragging benchmarks downward. Prices quickly rebounded, however, on Saudi reassurances that OPEC + would continue to manage crude oil supplies.
S&P Global Platts cited reports from other media saying the policy paper held U.S. President Trump responsible for the recent breakdown in trade negotiations, which hardly bodes well for the future of the negotiations. Prices tumbled on the news, but rebounded as Saudi stoked market optimism with vague promises of continued production quotas.
Just days after the last report on how well trade talks between Washington and Beijing were going President Trump complained on Twitter they were going too slowly and threatened new tariffs. He went through with the threat-to increase tariffs from 10 percent to 25 percent on US$200 billion worth of Chinese goods-and the retaliatory move came promptly, with China raising tariffs on U.S. liquefied natural gas.
Following this latest exchange of tariffs, Chinese refiners and commodity traders began shunning U.S. crude oil, refusing to commit to long-term contracts, which in itself weighed on oil prices. The other factor that pressured oil was the renewed concern for global economic growth as a result of the trade rout between the world's largest economies. Related: Why Battery Metals Are Bafflingly Cheap
"In its White Paper on US-China trade talks unveiled on Sunday, while China said it is still open to negotiation, they will not give ground on the issues of principle and will also fight to the end if necessary," S&P Global Platts quoted analysts from OCBC as saying today.
Meanwhile, President Trump also threatened tariffs against Mexico, which, Reuters reported, has deepened the pessimistic mood among traders and investors. Trump said he will impose 5-percent tariffs on Mexican goods next Monday if Mexico doesn't stop illegal immigration across the border between the two.
At the time of writing, Brent crude was trading at US$62.70 a barrel with West Texas Intermediate changing hands at US$54.45 a barrel. Both benchmarks were up over 1% from opening.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More