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Crude oil futures slip as trade tariffs kick in, eyes Hurricane Dorian

Singapore — Crude oil futures were lower during mid-morning trade in Asia Monday as market participants were concerned about the impact a new round of trade tariffs between the US and China will have on global demand and growth.

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At 10:45 am in Singapore (0245 GMT), the new front-month ICE Brent November futures were down 35 cents/b (0.59%) from Friday's settle at $58.9/b, while the front-month NYMEX October light sweet crude futures were 10 cents/b (0.18%) lower at $55/b.

New trade tariffs set by the US and China came into force on September 1 causing concerns about a future hit to global demand, sending prices lower, said analysts.

"Crude oil prices struggled as investors focused on the trade conflict, putting aside bullish supply-side issues," said analysts from ANZ Research in a note.

The US government began levying further 15% tariff on over $125 billion worth of Chinese imports.

"The latest tariffs set for 1 September had kicked into place as we head into a fresh week with sentiment expected to stay on the soft side," said Pan Jingyi, IG market strategist.

In retaliation, China imposed additional tariffs on some of the US goods on a $75 billion target list, while it imposed a new 5% levy on US crude oil starting from September 1, according to media reports Sunday.

Meanwhile, market participants would be closely following the impact of Hurricane Dorian in Southeast America, which is expected to make landfall in Florida on Tuesday.

"Traders are also keeping an eye on Hurricane Dorian, which turned into a category 5 storm and is expected to hit Florida later this week," said ANZ analysts in a note.

Concerns that Dorian will reduce demand for natural gas and gasoline were also bearish for oil and refined products prices.

"Oil fell in the US as investors feared that Hurricane Dorian approaching Florida could dampen demand," said analysts from UOB Bank in a note.

In refined products, the NYMEX front-month October RBOB fell 0.59 cents from Friday's settle at $1.5238/gal, while the front-month ULSD was down 0.32 cents/b at $1.8341/gal.

According to S&P Global Platts Analytics, Florida's distillate demand is roughly 149,000 b/d, about 3.8% of the US total, while the state's gasoline demand is 594,000 b/d, around 6.4% of the US total.

Dorian had yet to impact trade flows, apart from increased gasoline buying ahead of the storm. Analysts, industry and government sources suggested Dorian could pose significant risk to energy infrastructure and markets in the region.

As of 0245 GMT, the US Dollar Index was up 0.04% at 98.785.

--Avantika Ramesh, avantika.ramesh@spglobal.com

--Edited by Nurul Darni, nurul.indriani.darni@spglobal.com