A worker presses a valve that releases oil from a pipe into a bucket at an oil field (Photographer: Taylor Weidman/Bloomberg)

Crude Founders as Trade War Outweighs Iranian Supply Concerns

(Bloomberg) -- Crude dipped to a seven-week low as concerns that the U.S.-China trade war will weaken global energy demand defused apprehension about the fate of Iranian oil exports.

Futures in New York closed down 0.2 percent on Thursday. Iran is in the midst of a currency collapse, water shortages and deadly street protests as U.S. sanctions isolate the regime and some of the Islamic Republic’s biggest oil buyers look elsewhere for supplies. But the intensifying dispute between the world’s largest economies took center stage, imperiling economic growth.

“For every comment on the trade war, there’s also a comment on Iran,” said Bob Yawger, director of futures division at Mizuho Securities USA LLC. “They tend to cancel each other out to a certain degree and the market tends to whipsaw back and forth.”

Crude Founders as Trade War Outweighs Iranian Supply Concerns

Crude has traded below $70 a barrel this month in New York as the U.S.-China trade dispute threatened worldwide demand for oil-derived fuels. Iran’s situation is expected to grow more precarious as a November deadline approaches for a more restrictive round of U.S. sanctions.

West Texas Intermediate crude for September delivery slipped 13 cents to settle at $66.81 a barrel on the New York Mercantile Exchange, after trading was confined to a 92-cent range throughout the session. Total volume traded was about 28 percent below the 100-day average.

“We’ve got a lot of weak hands in the market,” said Michael Loewen, a commodities strategist at Scotiabank in Toronto. “People that have less conviction in their trades, as soon as they see any sign of evidence of the market turning against them, they will pull their positions.”

A measure of oil market volatility slipped to the lowest level since March.

Brent for October settlement dropped 21 cents to end the session at $72.07 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $5.93 premium to WTI for the same month.

China will apply 25 percent tariffs on American diesel, gasoline, propane and other petroleum products, according to the country’s commerce ministry. While U.S. crude was spared in the most recent list of levied products, the Asian nation may impose duties later if U.S. President Donald Trump doesn’t back down, according to Li Li, a research director at ICIS-China.

Oil-market news:

  • Gasoline futures slid 1 percent to settle at $1.9999 a gallon, the lowest since April. An Energy Information Administration report on Wednesday showed gasoline inventories last week rose for the first time since late June.
  • Analysts and traders are neutral on WTI crude futures, according to a Bloomberg survey. Forty-six percent of those surveyed were neutral, while 29 percent were bearish.
  • One of Iran’s biggest oil customers is buying more U.S. crude as Trump sticks to his pledge to squeeze the Persian Gulf nation’s energy trade. State-run refiner Indian Oil Corp. signed a term tender to purchase American oil for delivery every month between November and January.

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