Crude Drops as Trump Tariffs on China Spark Trade War Concerns

(Bloomberg) -- Crude took a turn lower amid an equity selloff largely pinned to growing apprehension about a potential trade war with China.

Futures edged down 1.3 percent in New York on Thursday after topping $65 a barrel this week for the first time since early February. U.S. stocks fell and Treasuries jumped as President Donald Trump formally ordered tariffs on $50 billion in Chinese goods, stoking fears of retaliatory measures by the Asian giant.

“It’s simply a risk-off type of day for all global risk assets,” said Bob Yawger, director of futures at Mizuho Securities USA Inc. in New York. “Considering the scope of yesterday’s rally, a little bit of a pullback shouldn’t come as all that much of a surprise.”

Crude Drops as Trump Tariffs on China Spark Trade War Concerns

The decline in crude prices is probably a temporary blip. OPEC’s output reductions have lowered inventories, with stockpiles in the U.S. falling below the five-year average for the first time since 2014. Meanwhile, Morgan Stanley sees London-traded Brent crude reaching $75 a barrel by the third quarter and also said geopolitical risks tend to be exacerbated when the supply cushion is thin.

West Texas Intermediate crude for May delivery dropped 87 cents to settle at $64.30 a barrel on the New York Mercantile Exchange.

Brent for May settlement slid 56 cents to end the session at $68.91 on the London-based ICE Futures Europe exchange, and traded at a $4.61 premium to WTI.

“If you have more tariffs and restrict trade, there’s just less movement in the economy,” said Mark Watkins, who helps oversee $142 billion in assets at Park City, Utah-based U.S. Bank Wealth Management. Such a slowdown “would potentially lower the overall demand for oil.”

Other oil-market news:

  • Gasoline futures fell 0.1 percent to settle at $2.0096 a gallon on Thursday.
  • All oil, natural gas and refining facilities in Saudi Arabia are safe and operating normally, state-run Aramco said, after Shiite rebels in neighboring Yemen were reported to have fired a missile at a company facility near the border.
  • When oil-rich Abu Dhabi put a string of offshore fields up for auction, suitors from China to Italy vied for a slice of the pie. Surprisingly, that piece was snatched from one of the world’s largest energy conglomerates. BP Plc missed out on a chance to renew its partnership in oil concessions off the emirate’s shores, which expired this month.

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