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Crude, products tumble on US-China trade war, EIA data

New York — The petroleum futures complex tumbled Wednesday on concerns that new tariffs imposed by the US and China on each other would slow economic growth, and on refined product inventory builds in the US.

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September NYMEX crude settled $2.23 lower at $66.94/b, while October ICE Brent settled $2.37 lower at $72.28/b.

NYMEX September RBOB fell 8.45 cents to settle at $2.0195/gal, while September ULSD futures settled 5.34 cents lower at $2.1157/gal.

"The market has tried to pick its head up over the past couple of weeks," said Tradition Energy vice president of research Gene McGillian.

NYMEX front-month crude has settled mostly between $67/b and $70/b since mid-July, ultimately failing with several attempted moves to the upside.

China on Wednesday announced tariffs on an additional $16 billion worth of US imports, after the US earlier in the day said it would slap 25% tariffs on another $16 billion worth of imports from China.

Several news agencies initially reported China had included US crude imports on its list, but while China included US refined product imports, it removed crude from its list.

China has not been importing as much US crude lately anyway because of the tariff concerns. China's imports of crude from the US fell sharply in July and are expected to drop further in August.

The market seemed more concerned that the growing US-China trade war could slow economic growth, lowering petroleum demand.

Petroleum futures also turned lower Wednesday after the US Energy Information Administration reported builds in refined product inventories, and a smaller-than-expected drawdown in crude inventories.

US gasoline stocks climbed 2.9 million barrels in the week that ended August 3 to 233.87 million barrels, while distillate stocks were up 1.23 million barrels at 125.42 million barrels.

US gasoline inventories climbed even refiners shifted to a higher distillate yield, and even as gasoline exports rose 75,000 b/d to 588,000 b/d. Also, analysts polled by S&P Global Platts were expecting a gasoline stock draw of 1.9 million barrels.

Gasoline traders likely saw the 532,000 b/d drop in implied gasoline demand to 9.35 million b/d as a selling opportunity, although on a four-week moving average, implied demand was unchanged at 9.7 million b/d.

US distillate inventories climbed 1.23 million barrels last week to 125.42 million barrels, exceeding analysts' expectations of a 550,000 barrel build.

Combined low and ultra low sulfur diesel stocks on the USAC jumped 2.44 million barrels to 36.73 million barrels, which was bearish for the New York-delivered NYMEX ULSD contract.

USAC stocks are still tight, but the deficit to the five-year average has tightened to 15% in the week that ended August 3 from 25.4% in the week that ended July 6.

US crude stocks fell 1.35 million barrels in the week that ended August 3, as higher refinery runs and exports offset a rise in crude imports, the EIA data showed.

However, the stock decline was lower than expected, and combined with product inventory builds, pulled crude futures lower.

The stock draw fell far short of the 3.7-million barrel decline expected by analysts polled by S&P Global Platts, and the 6-million barrel decline reported by the American Petroleum Institute Tuesday evening.

--Jeff Mower, jeff.mower@spglobal.com

--Edited by Keiron Greenhalgh, keiron.greenhalgh@spglobal.com