Oil tumbles 4% amid global trade tensions

Oil futures fell nearly four percent in American trade as the dollar index lost ground, following earlier data that showed a lower-than-expected inventory drawdown last week, and amid mounting US-China trade tensions.  

As of 04:30 GMT, US crude futures due in September fell 3.95% to $66.44 a barrel, while Brent October futures dropped 3.58% to $71.98 a barrel, as the dollar index inched up 0.04% to 95.22. 

Earlier Chinese data showed the trade surplus fell to 177 billion yuan, or $28.1 billion in July, compared to 262 billion yuan in June, and missing estimates of 229 billion, as imports outpaced exports last month. 

China's crude imports recovered modestly in July after a drop in the last two months, but still hovered around year lows as refinery demand weakens, with imports amounting to 36.02 million tonnes last month, or 8.48 million bpd, compared to 8.18 million in the same month of 2017, and up slightly from June's 8.36 million. 

US Inventory Drawdown 

The Energy Information Administration released its report on US crude stocks, showing a drawdown of 1.4 million barrels in the week ending August 3, compared to a 3.8M buildup in the previous reading, while analysts expected a 2.8 million decline, with total stocks now down to 407.4 million barrels, 1% below five-year averages for this time of year. 

Gasoline stocks rose 2.9 million barrels, making them 4% above five-year averages, while distillate stocks, including heating fuel, rose 1.2 million barrels, still 10% below averages. 

The EIA also cut forecasts for global oil demand growth by 60 thousand bpd in 2018, and by 140 thousand bpd in 2019 to 1.66 million and 1.57 million bpd respectively, while expecting US output to rise by 1.31 million bpd this year, down from 1.44 million in previous forecasts.  

Iran sanctions 

China's foreign ministry criticized US threats against those who trade with Iran by stating to Reuters: “China has consistently opposed unilateral sanctions and long-armed jurisdiction,”

It added: “China’s commercial cooperation with Iran is open and transparent, reasonable, fair and lawful, not violating any United Nations Security Council resolutions,” 

The US has reimposed blanket sanctions on Iran this week, targeting its access to dollars, gold, and precious metals. 

US Department of State officials have pointed to over 100 international companies who have agreed to withdraw from Iran after planning ventures as US sanctions take place, with even more stringent ones coming next November. 

China is Iran's largest oil importer, with orders amounting to 650 thousand bpd, or 7% of the country's total crude imports. 

US-China Trade tensions 

China slapped $16 billion worth of US imports with 25% additional tariffs in response to similar ones by the US, to go into effect in late August, weighing on risk appetite in the market and hurting oil prices in the process. 

Otherwise, Federal Reserve Bank of Richmond President Thomas Barkin spoke earlier today at a town hall event, in Virginia, where he lauded the the strong performance and outlook for the economy, with stellar growth, unemployment numbers, while wages are growing quickly.

Barkin believes that inflation is heading firmly towards the Federal Reserve's 2% target, while both business and consumer confidence continue to improve, in turn all allowing for the Fed to increase interest rates and tighten policy in a gradual manner.  

Iran Claims Improper Redistribution in OPEC's Output 

Iranian oil minister Bijan Zanganeh has claimed that the six-country committee overseeing the recent output agreement between OPEC and other producers improperly redistributed output in a way that harms Iran, calling on UAE energy minister and OPEC President Suhail al-Mazrouei to investigate the matter. 

US Oil Rig Count 

Banker Hughes, a US oil services company, reported a drop of 2 in the US oil rig count last week to a total of 859 rigs, the second decline in the last three weeks.