Oil headed for its worst week in a month after US President Donald Trump called for new tariffs on Chinese goods, souring investor optimism that tensions between the world’s two largest economies will ease with negotiations.
Futures fell as much as 1.1 percent in New York and are set for a 2.8 percent drop this week. Trump ordered the US Trade Representative to consider levies on an additional $100 billion in imports from the Asian nation, spurring a flight from risk assets on concern a full-blown trade war will deter global economic growth. That was only a day after both American and Chinese officials signaled they’re willing to talk on frictions.
Uncertainty over the spat has rattled investors and prompted oil to seesaw below $64 a barrel this week. It’s also undermined the effect of a surprise drop in US stockpiles that was helped by the nation’s record high crude exports. While China has taken aim at America’s rural heartland by proposing levies on politically sensitive farm commodities such as soybeans, its list of targeted products also includes some petrochemicals, indicating it’s is willing to use energy as a weapon to retaliate.
“Trump’s continuous threats when both China and the US indicated that the doors are open for talks are prompting investors to dump risky assets including oil,” Hong Sungki, a commodities trader at NH Investment & Securities Co., said by phone in Seoul. “Surging crude exports in the U.S. have contributed to a surprise drop in the nation’s stockpiles.”
West Texas Intermediate for May delivery dropped as much as 72 cents to $62.82 a barrel on the New York Mercantile Exchange, and traded at $63.13 at 7:47 a.m. in London. The contract is heading for a second weekly drop after climbing 17 cents to $63.54 Thursday. Total volume traded was about 11 percent above the 100-day average.
Brent for June settlement lost as much as 66 cents, or 1 percent, to $67.67 a barrel on the London-based ICE Futures Europe exchange. Prices are down 3.4 percent this week. The global benchmark crude traded at a $4.74 premium to June WTI.
A White House official later said the $100 billion figure Trump used in the statement referred to the value of the imports that would be covered by the additional tariffs, not the total amount of tax that would be charged on the products. The new front in the trade war between the US and China is sending commodities from copper to soybeans tumbling. The Bloomberg Commodity Index that measures returns on 22 basic resources has lost 0.8 percent this week.
In the U.S., outbound shipments of crude surged to 2.18 million barrels a day last week, the highest level in the Energy Information Administration’s weekly data compiled since 1993. The increase helped drag the nation’s crude storage down by 4.62 million barrels, in contrast to a forecast for a 2 million-barrel gain.
Eni is in talks to sell a stake in its giant oil discovery in Mexico to Qatar Petroleum International, according to people with knowledge of the plans. Gasoline futures dropped 0.6 percent to $1.9706 a gallon, heading for a second weekly decline