Oil Falls as US-China Dispute Threatens Trade
June 19 2018 - 1:30PM
Dow Jones News
By Sarah McFarlane and Benjamin Parkin
Oil prices fell on Tuesday as trade tensions and expectation of
growing production threatened to upset the global supply-and-demand
balance.
West Texas Intermediate futures fell 1.9% to $64.62 a barrel at
the New York Mercantile Exchange. Brent crude, the global oil
benchmark, fell 0.9% to $74.70 a barrel on London's ICE Futures
exchange.
Global markets fell on Tuesday after President Donald Trump said
he was looking to extend duties on Chinese imports to $200 billion
of goods, a sharp escalation of a recent trade dispute. China last
week said it planned duties against U.S. crude oil among other
imports, itself a response to earlier U.S. tariffs.
Traders were betting the escalating dispute could threaten
growth, global oil demand and a crucial market for American
crude.
"We're seeing a reemergence of concerns about global trade,"
said Gene McGillian, vice president of research at Tradition
Energy. "The record production that we're seeing in the U.S. would
have trouble making it onto the global market."
Oil prices have whipsawed in recent sessions as traders prepare
for a meeting of the Organization of the Petroleum Exporting
Countries and its allies this Friday in Vienna, at which the global
cartel is widely expected to sanction increased production.
Expectations have ranged between an increase of 300,000 barrels
a day of oil production at the low end -- which some traders see as
supportive to prices -- up to 1.5 million barrels a day.
A concern for traders, Mr. McGillian said, was that global
supply from OPEC and others could grow as trade tensions start to
stymie demand.
There are only a few producers who are able to increase output
including Saudi Arabia, Russia, the U.A.E. and Kuwait, which could
mean other producers resist any production hike for fear it will
send prices lower.
"There might be more intense discussions, but I guess in the end
they will come up with a consensus decision for a small production
increase in the short term," said Giovanni Staunovo, commodity
analyst at UBS Wealth Management.
Brent prices have eased around 7% since peaking at over $80 a
barrel in May after OPEC-led cuts helped drain global inventories,
prompting Mr. Trump to blame the cartel for making oil prices
"artificially very high."
"Investors are still trying to understand if the fall of the
past few weeks could be considered as an inversion or -- as it
seems so far -- just as a correction," said Carlo Alberto De Casa,
chief analyst at ActivTrades.
A rebel attack on Libyan ports has shut down nearly half of the
country's output, Mustafa Sanallah, head of the country's National
Oil Corp, said Tuesday. The supply disruption is helping to
underpin prices, analysts said.
Among refined products, gasoline futures fell 0.9% to $2.0358 a
gallon while diesel contracts slid 0.7% to $2.1166 a gallon.
Write to Sarah McFarlane at sarah.mcfarlane@wsj.com and Benjamin
Parkin at Benjamin.Parkin@wsj.com
(END) Dow Jones Newswires
June 19, 2018 13:15 ET (17:15 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.