Oil prices fall on fears of escalating US-China trade war

Oil prices fall on fears of escalating US-China trade war

Front-month Brent crude futures, the global benchmark for oil prices, dropped $1.15 from their last settlement to reach at $65.72 at 0844 GMT.

The U.S. Energy Information Administration reported crude stockpiles fell almost 300,000 barrels last week, less than the 900,000 Bbl decline analysts forecast in a Reuters poll, and well below the 5.3-million-barrel draw the American Petroleum Institute reported late Wednesday.

WTI Crude plunged 3.08 per cent at $57.32, while Brent Crude lost 2.52 per cent to stay at $66.94.

"The possibility that tariffs could now be placed on crude arrivals from Mexico at the same time that rising Chinese tariffs are threatening to slow world oil demand growth has pushed nearby WTI to below our expected support at the $56 mark", Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.

For the month, Brent is on track to fall about 8 per cent and WTI around 11 per cent, which would be the first monthly decline for both contracts in five months. -China trade war increased the danger of a recession.

A senior Chinese diplomat compared trade actions from Washington to "naked economic terrorism".

They also went tactically short Brent-Dubai Q3'19 swap spread due to mounting risks from Iran sanctions.

Iranian May crude exports dropped to less than half of April levels at around 400,000 barrels per day (bpd), tanker data showed and two industry sources said, after the United States tightened sanctions on Tehran's main source of income.

"The only reason that oil hasn't fallen further is that supply remains relatively tight with ongoing Opec supply cuts, tensions in the middle east and Venezuela's on-going political struggles". Iran needs to export at least 1.5-2.0 Mmbpd of crude to balance its books.

Many analysts expect the OPEC-led supply cuts to be extended in a meeting to be held either late June or early July as OPEC's de-facto leader Saudi Arabia wants to prevent oil prices falling back to levels seen in late 2018 when Brent slumped to $50 per barrel.

OPEC and other major oil producers, including Russian Federation, pledged in December to cut production by 1.2 million barrels per day in order to prop up prices, effective from this January.