Oil Dips as U.S.-China Trade Worries Outweigh Supply Disruptions
(Bloomberg) -- Crude slid as a trade spat between the U.S. and China overshadowed concerns over global supply disruptions.
Futures in New York fell 0.7%. Just as the U.S. and China prepare for talks in Washington, President Donald Trump said that China’s leaders “broke the deal” he was negotiating with them on trade. Beijing has warned it will retaliate if he follows through on a plan to raise tariffs. Meanwhile, Iran’s oil shipments tumbled this month with not a single ship seen leaving the nation’s oil terminals for foreign ports.
“The fears over the fallout from the U.S.-China trade war is impacting everything,” said John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy. “It’s just so damaging to the Asian economies in particular and it goes to the heart of the demand side of the equation in oil.”
Crude’s rally has fizzled over the past two weeks as rising U.S. production and stockpiles diminish the impact from the end of Iran sanctions waivers and Venezuela’s economic crisis. A surprise storage drop reported this week wasn’t enough to sustain a rebound as the focus turned to the impact a trade war could have on demand.
West Texas Intermediate crude for June delivery slid 42 cents to settle at $61.70 a barrel on the New York Mercantile Exchange. Brent for July settlement gained 2 cents to $70.39 a barrel on the London-based ICE Futures Europe exchange.
A key technical indicator shows a potential rebound may be in store. Brent crude is hugging the lower Bollinger band, indicating the commodity is oversold.
China’s top trade envoy, Vice Premier Liu He, was due to land in the U.S. capital on Thursday afternoon and go immediately into discussions with President Donald Trump’s top negotiator, Robert Lighthizer. U.S. tariffs on some $200 billion in Chinese goods are set to increase to 25% just hours later.
Oil’s decline has been “driven by the equity sell-off and the risk fears that we’ve seen,” said Rob Haworth, who helps oversee $151 billion at U.S. Bank Wealth Management in Seattle. "For now, with this global risk-off sentiment, that leaves oil under pressure no matter what, unless we start to see signs of actual shortages.”
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