Oil tumbles 3% on US-China trade worries

2018-07-11 19:06:13 GMT (Economies.com)
Oil tumbles 3% on US-China trade worries

Crude futures slumped to two-week lows as the dollar index gained ground, shrugging off earlier data from the US, the world's largest energy consumer, which showed a larger-than-expected inventory drawdown, and after the US threatened a 10% tax on $200 billion worth of Chinese products. 


As of 05:02 GMT, US crude futures due on August 15 fell 2.67% to $72.13 a barrel from the opening of $74.11, while Brent futures due on September 15 flagged 3.59% to $76.03 a barrel from the opening of $78.86, as the dollar index added 0.32% to 94.46 from the opening of 94.16. 


Earlier US data showed producer prices rose 0.3% in June, slowing down from 0.5% in May and beating estimates of 0.2%, while core prices rose 0.3%, same as before and also beating forecasts of 0.2%. 


The final reading for wholesale inventories showed a 0.6% increase, up from 0.5% in the preliminary reading, and 0.1% in April. 


Sharp Drawdown 


The Energy Information Administration released its report on US crude stocks, showing an extensive drawdown of 12.6 million barrels in the week ending July 6, compared to a 1.2 million buildup in the previous reading, while analysts expected a 4.1M drop, with total stocks now down to 405.2 million barrels, 4% below the five-year average for this time of year. 


Gasoline stocks fell 0.7 million barrels, making them 6% above five-year averages, while distillate stocks, including heating fuel, rose 4.1 million barrels, still 12% below the five-year average. 


US-China Trade Dispute 


US trade representative Robert Lighthizer said a suggested 10% tariff on Chinese products will take up to two months for deliberation to allow public discussion before going into effect. 


China imposed tariffs ranging from 33.3% to 78.2% on US optical fiber products this week to counter flooding the market with these imports, up from 4.7% to 18.7% in previous rates. 


That comes after US imposed a 25% tariff on $34 billion worth of Chinese products last Friday, with China responding with similar ones. 


Global Demand 


In its monthly report, OPEC expected a drop in global oil demand next year as consumption slows down as supplies increase, forecasting 32.18 million bpd of demand on OPEC's output, down 760 thousand bpd from this year, while expecting OPEC's production to increase past estimated demand in June to 32.33 million bpd. 


US Oil Rig Count 


Baker Hughes, a US oil services company, reported an increase of 5 in the American oil rig count for the first time in three weeks to 863 rigs, the highest since March 2015. 


US output rose over 29% from mid-2016 levels to 10.9 million bpd, a record high, passing Saudi Arabia's 10.7 million bpd and nearing Russia's 11.1 million bpd. 

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