Crude oil continued sliding today on the back of growing tensions between the United States and China and anticipation of a difficult OPEC+ meeting on Friday.
At the time of writing Brent crude was trading at US$75.04 a barrel, down 0.40 percent, with WTI down 1.25 percent to US$64.87 a barrel, after President Trump said he will consider imposing import tariffs on another US$200 billion worth of Chinese goods. The move followed Chinese retaliation against the Friday round of tariffs, which also included a 25-percent levy on U.S. crude oil, gas, and coal imports, among other goods and products.
Reuters reported yesterday that Chinese tariffs on U.S. oil will disrupt a business worth some US$1 billion monthly and will hurt U.S. producers in favor of OPEC and Russia. Iran could turn out to be a special beneficiary of the trade spat, which would undermine another line of President Trump’s foreign policy.
Yet oil’s fundamentals are also pressuring prices. S&P Platts quotes Goldman Sachs analysts as saying in a note to clients that oil prices have been pressured in the past three weeks, not just by geopolitical developments but also by weaker demand from emerging markets and rising inventories. Related: Iran Looks To Veto Saudi, Russian Oil Production Proposal
Indeed, shipping data recently showed oil in floating storage in Europe, for one, was at an 18-month high in May, at 12.9 million barrels. In Asia, oil in floating storage was 9.7 million barrels in the same month.
These updates certainly don’t work for prices as OPEC and Russia are about to meet on Friday and Saturday to discuss reversing the oil production cuts they agreed to in late 2016. There is staunch division within OPEC about the reversal, and the cartel risks breaking apart after this meeting if it fails to arrive at a consensus decision. Still, the consensus expectation is for a production rise following the meeting, which exerts its own pressure on oil pries and will continue doing so until at least Friday.
By Irina Slav for Oilprice.com
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