Singapore — Crude oil futures were lower during mid-morning trade in Asia Thursday, as the market focus remained on the ongoing trade war between the US and China.
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At 11:20 am Singapore time (0320 GMT), July ICE Brent crude futures were down 67 cents/b (0.95%) from Wednesday's settle to $69.70/b, while the NYMEX June light sweet crude contract lost 63 cents/b (1.01%) at $61.49/b.
"The effects of US-China trade tensions have imposed negative pressures on oil prices as traders fret over weaker fuel demand prospects," Benjamin Lu, investment analyst at Phillip Futures, said.
"Market watchers wait with bated breath as the US-Sino trade talks start today and will last over the next two days (May 9-10, 2019), as the sell-off in US-related and Asian equities continue," UOB Bank analysts said in a note.
The United States Trade Representative Wednesday took steps to formalize President Donald Trump's threat to boost tariffs on $200 billion worth of Chinese goods to 25% from 10% and the Chinese Ministry of Commerce warned of retaliatory steps if the US follows through, potentially affecting flows of US crude and LNG to one of its most significant markets, S&P Global Platts reported earlier.
In a statement Wednesday, China's Ministry of Commerce said escalating trade frictions are not in the interest of either country or the world and said the Chinese side regrets it will have to take countermeasures if the US goes ahead with the increase.
The USTR sent a notice to the Federal Register that is scheduled to be published Thursday. The tariff increase on the US side is expected to go into effect early Friday morning.
A Chinese delegation, led by Vice Premier Liu He, is scheduled this week to hold trade talks with the US in Washington, according to media reports.
"China has just informed us that they (Vice Premier) are now coming to the US to make a deal," Trump said on Twitter Wednesday. "We'll see, but I am very happy with over $100 billion a year in tariffs filling US coffers ...", he added.
The remarks made by Trump on Wednesday pulled prices lower despite a draw reported in US crude stocks last week, analysts noted.
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According to data released Wednesday by the US Energy Information Administration, US crude inventories for the week ended May 3 were down 3.96 million barrels. Analysts surveyed by Platts on Monday were looking for US crude stocks to have declined by 2.2 million barrels for the same period.
Looking at Iran, another hot topic for the oil markets, Brian Hook, the US State Department's special representative for Iran, said the impact of US oil policy on crude prices has been minimal.
"Oil markets are stable and well-supplied," Hook said during an appearance at the Center for Strategic and International Studies that coincided with the one-year anniversary of Trump's formal withdrawal from the Iran nuclear deal.
"We have zeroed out purchases of Iranian crude and condensate in a measured way," Hook said.
Separately, in a television interview Wednesday, Abbas Araghchi, Iran's deputy foreign minister for political affairs, said to remain in the nuclear deal, known as the Joint Comprehensive Plan of Action, Iran wants oil and condensate exports to reach 2.8 million b/d -- the level it was last April.
Vishnu Varathan, senior economist at Mizuho Bank said: "Rising US-Iran tensions could put oil buoyancy back on track."
As of 0320 GMT, the US Dollar Index was up 0.03% at 97.4.
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--Edited by Geetha Narayanasamy, email@example.com