Oil prices fall as trade war concerns mount

Crude rebounds after big drop following Trump's threat to raise tariffs on Chinese goods

Hua Chunying, Director of the Foreign Ministry for China, has said Beijing would not give an inch under pressure from Washington and "If America does pass these tariffs then China will have to take the necessary countermeasures to protect the country's core and fundamental interest". The ministry did not elaborate on how exactly it would retaliate.

"The U.S. -China trade war is worsening in every conceivable way", said Satoru Yoshida, a commodities analyst at Rakuten Securities Inc.in Tokyo.

He also said - without presenting evidence - that countries are asking to negotiate "REAL trade deals", saying on Twitter, "They don't want to be targeted for Tariffs by the U.S".

Oil prices markedly dropped on Monday, as the market has been overshadowed by rising concerns over trade tensions between the United States and China.

Still, economists are pricing additional escalations in the trade war between the US, the largest producer of oil in the world, and China, which the EIA called the world's second largest buyer of oil in 2016, the last month for which data is available.

President Trump announced last week that he would impose a ten percent tariff on up to three hundred billion dollars of Chinese imports starting next month. It is the world's biggest crude oil importer. China received 37.69 million mt, or around 1.53 million b/d, of crude from Russian Federation in H1, up 15.2% year on year.

Zarif in the post-sanctions era
Meanwhile the USA continues to target Iran economically, while holding out the prospect of possible talks. The statement went on to say that Iraqi authorities were working to gather information about the vessel.

London-traded futures erased an earlier rally to fall about 0.5% on Tuesday.

"If that carries on through the end of 2019 or perhaps even 2020 as we enter the firm end of the United States election cycle when Trump is likely to want to maintain that hard stance on China, then it could be a very difficult barrier for crude to try and break through some of those demand concerns".

Concerns over falling demand will continue to weigh on prices due to the U.S.

However, the tensions could move to the forefront if US equity markets can hold on to their earlier gains in response to China's support of its Yuan. Any resulting economic slowdown could hurt crude demand. U.S. shipments surged by 260,000 barrels a day (b/d) in June to a monthly record of 3.16 million b/d, U.S. Census Bureau data showed on Friday. The island state received 192,998 b/d of crude oil from the USA in January-May, more than double from same period a year earlier, according to data from the Bureau of Energy, Ministry of Economic Affairs.

The 2019 budget, which was signed by President Muhammadu Buhari in May, was based on oil production of 2.3 million bpd (including condensates) with an oil benchmark price of $60 per barrel.

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