Oil prices drop as trade war concerns haunt market

Published: December 10, 2019
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Dec 15 deadline for next round of US tariffs on Chinese imports looms over markets. PHOTO: REUTERS

Dec 15 deadline for next round of US tariffs on Chinese imports looms over markets. PHOTO: REUTERS

LONDON: Oil prices slipped for a second straight day on Tuesday as a slowing global demand outlook outweighed OPEC’s deal with associated producers last week to deepen output cuts in 2020.

Brent crude was down $0.33, or 0.5%, at $63.92 per barrel by 1134 GMT while West Texas Intermediate oil was $0.29, or 0.5%, lower at $58.73 a barrel.

The benchmarks fell 0.2% and 0.3% respectively on Monday.

Last week, the Organisation of the Petroleum Exporting Countries (OPEC) and associated producers like Russia agreed to deepen output cuts from 1.2 million barrels per day (bpd) to 1.7 million bpd to support prices.

However, crude prices have fallen this week as a December 15 deadline for the next round of US tariffs on Chinese imports loomed over markets.

“Now with OPEC+ meetings out of the way, the market will likely focus back to trade talk developments, particularly with the 15 December deadline fast approaching,” ING analyst Warren Patterson said.

US President Donald Trump does not want to implement the next round of tariffs, US Agriculture Secretary Sonny Perdue said on Monday – but he wants “movement” from China to avoid them.

Tamas Varga of oil broker PVM said further US tariffs on Chinese goods “will have a tangible impact both on commodities and equities, at least in the immediate future.”

Data released on Sunday showed exports from China in November fell 1.1% from a year earlier, confounding expectations for a 1% rise in a Reuters poll.

However, the growth rate of China’s imports of major commodities has accelerated in recent months, indicating Beijing’s stimulus efforts may be bearing fruit and that the impact of trade war may not be as bad as feared.

The market is also on edge ahead of other events this week, with the British election on Thursday and US and European Central Bank meetings.

Gazprom Neft CEO Alexander Dyukov said on Tuesday a decision by OPEC and its allies to cut output would help support oil prices at $55-65 per barrel in the first quarter.

US crude oil inventories were expected to have dipped last week, while stocks of refined products were seen higher with gasoline stocks set to rise for the fifth straight week, a preliminary Reuters poll showed.

The American Petroleum Institute (API), an industry group, is scheduled to release its data for the latest week at 4:30 PM EST (2130 GMT) on Tuesday, and the weekly EIA report is due at 10:30 AM on Wednesday.

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