|
US-China trade dispute hits oil prices
On Aug. 3, China said it planned to place tariffs on US liquefied natural gas
Kay Cashman Petroleum News
As the market closed for crude oil on Aug. 7, prices continued to climb and then dropped on Aug. 8, bearing out analyst warnings that the rise to $150 per barrel oil wouldn’t be smooth.
Following a dip a few days earlier, prices recovered. Alaska North Slope, or ANS, crude was at $75.21, up 36 cents from the day before when it closed at $74.84.
But prices again fell on Aug. 8 by about 3 percent as the United State-China trade dispute heated up, CNBC reported.
China threatens tariff on oil, gas exports from U.S. Oil prices fell sharply in part because China threatened to put a 25 percent tariff on $16 billion of U.S. goods, including oil, responding to President Donald Trump’s plan to slap the same tariff on an equal amount of Chinese imports in the coming weeks, CNBC reported, noting “the mounting trade tension has raised concerns that global economic growth will slow, lowering demand for crude oil in the process.”
On Aug. 3, China said it planned to place tariffs on U.S. liquefied natural gas, which bodes poorly for Alaska Gov. Bill Walker’s plans to build a gas pipeline from the North Slope, with most of the gas going to China.
“It’s certainly going to impact on movement between the U.S. and China, making it less efficient, meaning pressure on prices here,” Andrew Lipow, president of Lipow Oil Associates, told CNBC.
WTI oil prices hardest hit ANS prices were not available for Aug. 8 as this issue of Petroleum News went to press, but West Texas Intermediate, or WTI, crude futures ended the day at a seven-week low, dropping $2.23, or 3.2 percent, to $66.94.
According to an Aug. 7 story from Bloomberg, the pace of U.S. crude output growth looked to be slowing, which bodes well for oil prices.
The increase was attributed to a new report from the U.S. Energy Information Administration, which dropped its estimate for domestic oil production from 11.8 million barrels per day to 11.7 million bpd.
Part of the problem seems to be output from the Permian basin in the southwest U.S. where drilling plateaued in late June, possibly due to pipeline constraints that have dropped wellhead prices in the area.
Halliburton warned that second-half 2018 profits would suffer on a slowdown in the Permian and other parts of the U.S., “citing pipeline shortages and other issues that will delay work in the Permian and Marcellus basins,” Bloomberg said.
“U.S. crude stockpiles are seen falling as the driving season continues, helping oil hold near $69 a barrel,” Will Yun, a commodities analyst at Hyundai Futures Corp., told Bloomberg Aug. 6. “At the same time, oil’s being pulled from the other side, with the ongoing trade dispute between the U.S. and China putting downward pressure on commodities including oil.”
Trump means what he says about sanctions As for Iran, Newsweek reported Aug. 8 that while Trump wants lower oil prices and presses the Organization of the Petroleum Exporting Countries, or OPEC, to increase market supply, his withdrawing the U.S. from the Iran nuclear deal and re-imposing economic sanctions will drive oil prices even higher.
On Aug. 7, “the sanctions on Tehran kicked back in and will escalate further later in the year. It puts American allies who still support the Iran nuclear deal, particularly the European Union, or EU, in a difficult position,” the news magazine said.
As Trump said in one of his infamous tweets, “Anyone doing business with Iran will NOT be doing business with the United States.”
The EU trades with Iran, which includes buying oil. It instructed businesses to continue to do so if they wish, despite American sanctions.
“But companies all over the world, including those inside the EU, will weigh the cost of losing American business against continuing to trade with Iran,” Newsweek said.
And that will impact oil prices by creating doubt about Iran’s ability to continue selling its oil in global markets now that the U.S. is pushing Iran out of the market.
Trump pulled out of the nuclear deal because Iran defied the 2015 deal under which sanctions were dropped in exchange for allowing inspectors to verify that its nuclear program was not about making weapons.
| 