OIL FUTURES: Crude down on renewed tariff fears

Crude oil futures were lower during mid-afternoon Asian trade June 12 as US President Donald Trump threatened to set more unilateral tariffs in two weeks, sending markets into a risk-off mood.

At 4:03 pm Singapore time (0803 GMT), the ICE August Brent futures contract was down 70 cents/b (1%) from the previous close at $69.07/b, while the NYMEX July light sweet crude contract was down 64 cents/b (0.94%) from the previous close at $67.51/b.

Crude oil futures prices fell after Trump announced that he would impose unilateral tariffs on trade partners in the next two weeks.

"There are rumours that the EU will hardly ink a deal before the July deadline, and Trump has threatened other Asian nations with fresh tariffs -- saying his administration will send letters within two weeks to inform them of unilateral tariffs as a pressure tactic," Ipek Ozkardeskaya, senior analyst at Swissquote Bank said.

Analysts added that the cheers from the US and China's agreement to relax China's export of rare earth minerals to the US were short-lived.

"Mounting geopolitical stress in the Middle East boosted Brent over the $70/b [level], but profit-taking followed," Priyanka Sachdeva, senior analyst at Phillip Nova said.

The US State Department ordered all nonessential personnel at the US Embassy in Iraq to depart the country June 11, citing security concerns and mounting Middle Eastern tensions. Geopolitical tensions could disrupt supply flows, and thus exerted upward pressure on crude oil futures prices late June 11.

"But prices seem to correct in the Asian morning [June 12] following the news that Trump is likely to push the 'July 8th deadline for tariffs'," Sachdeva from Phillip Nova said.

"Trump apparently expects the tariffs to stay as they were set in Geneva -- meaning 10% on US exports to China and 55% on Chinese exports to the US -- while there's no news regarding US technology exports to China," Ozkardeskaya said.

Still, crude oil futures prices could see upside risk as the US Consumer Price Index data came in cooler than anticipated.

The US headline inflation rate in May fell by 10 basis points month over month to 0.1%, defying market expectations of it remaining unchanged at 0.2% from the previous month, latest data from the US Bureau of Labor Statistics showed.

Core inflation rate in May -- which excludes food and energy prices -- fell by 10 basis points month over month to 0.1%, defying market expectations of a rise by 10 basis points to 0.3%.

Softer inflation data lifted some optimism around global demand expectations, analysts noted.

"That fueled dovish Federal Reserve expectations and sent the US [treasury bond] 2-year yield lower -- boosting stock valuations... But the post-CPI rally was short-lived as investors quickly moved to the sidelines ahead of today's much-watched 30-year bond auction, which could -- maybe -- remind investors about the US' exploding and unsustainable debt levels," Ozkardeskaya added.

Dubai crude

Dubai crude swaps and intermonth spreads were higher during mid-afternoon Asian trading June 12.

The August Dubai swap was pegged at $67.43/b at 2:15 pm Singapore time (0615 GMT), up $1.93/b (2.95%) from the previous Asian market close.

The July-August Dubai swap intermonth spread was pegged at 93 cents/b, 5 cents/b wider over the same period, and the August-September Dubai swap intermonth spread was pegged at 70 cents/b, 8 cents/b wider.

The August Brent-Dubai exchange of futures for swaps was pegged at $1.90/b, 31 cents/b wider over the same period.