Oil dips as US-China trade war intensifies

US sanctions have halved Iranian crude exports over the past year to below 1 million bpd

LONDON: Oil prices fell on Tuesday as renewed doubts over US-China trade talks stoked jitters over global growth, but losses were tempered by a US military deployment to the Gulf to deter Iran.

US West Texas Intermediate crude futures were at $61.97 per barrel, down $0.28 or 0.45%.

US President Donald Trump said on Sunday he would raise tariffs on $200 billion worth of Chinese goods from 10% to 25% by Friday, comments that dragged down Asian and US stock markets.



"The United States has been losing, for many years, 600 to 800 billion dollars a year on trade. With China we lose 500 billion dollars. Sorry, we're not going to be doing that anymore!" Trump tweeted on Monday.

On the supply side, oil markets remain tense as the United States has tightened sanctions on Iranian oil exports and plans to bulk up its forces in the world's top oil-exporting region.

US officials announced on Sunday that the movement of the Abraham Lincoln carrier strike group and a bomber task force towards the Middle East was meant to counter "credible threats", but Tehran dismissed the move as a "psychological warfare".

US sanctions have already halved Iranian crude exports over the past year to below 1 million barrels per day (bpd) and shipments to customers are expected to drop to as low as 500,000 bpd in May as sanctions tighten.

Washington has also placed sanctions on oil exports from Venezuela, a founding member of the Organisation of the Petroleum Exporting Countries (OPEC).



Goldman Sachs said "the recent Brent pullback has taken prices too low in the face of tight fundamentals and growing supply risks, just as refiners come back from extended spring turnarounds".

The US bank said "we therefore expect a near-term Brent rebound", although it added that "beyond the next couple of months ... all these supply and demand cross-currents will dissipate to bring a balanced global oil market, once new (US) Permian transport capacity is online and core-OPEC ramps up".

Bank of America Merrill Lynch said it expected Saudi Arabia "to bring back oil production slowly as Iranian barrels exit the market", adding that it saw Brent having a floor at $70 per barrel in current market conditions.