SINGAPORE/TOKYO (Reuters) - Oil prices fell on Monday amid renewed global economic growth concerns after U.S. President Donald Trump vowed to escalate the trade war with China with more tariffs, which would likely limit fuel demand in the world's two biggest crude consumers.
Brent crude futures (LCOc1) had dropped 92 cents, or 1.5%, to $60.97 a barrel by 0640 GMT.
U.S. West Texas Intermediate (WTI) crude futures (CLc1) declined 73 cents, or 1.3%, to $54.93 a barrel.
Both crude benchmarks fell last week, with Brent down 2.5% and U.S. crude falling 1%.
Asian equity markets dropped to a six-month low on Monday while gold prices climbed as investors sought safe-haven assets because of the ratcheting up of the trade dispute between China and the United States, the world's two largest economies.
"Crude oil futures experienced significant headwinds as global risk appetites remain feeble over subdued global growth and a sudden escalation in the Sino-U.S. trade dispute," said Benjamin Lu, commodities analyst at Singapore-based brokerage Phillip Futures.
Trump last week said he would impose a 10% tariff on $300 billion of Chinese imports starting on Sept. 1 and said he could raise duties further if China's President Xi Jinping failed to move more quickly toward a trade deal.
The announcement extends U.S. tariffs to nearly all imported Chinese products. China on Friday vowed to fight back against Trump's decision, a move that ended a month-long trade truce.
On Monday, China let the yuan tumble beyond the key 7-per-dollar level for the first time in more than a decade, in a sign Beijing may tolerate further currency weakness because of the trade dispute.
The 1.4% drop in the yuan came after the People's Bank of China (PBOC) set the daily mid-point of the currency's trading band at its weakest level since December 2018.
A lower yuan would raise the cost of China's dollar-denominated oil imports. It is the world's biggest crude oil importer.
Signs of rising oil exports from the United States also pressured prices on Monday. U.S. shipments surged by 260,000 barrels per day (bpd) in June to a monthly record of 3.16 million bpd, U.S. Census Bureau data showed on Friday.
The trade war and rising supply should accelerate the trend of speculators reducing their bullish positions in the WTI futures markets.
Speculators cut bullish wagers on U.S. crude in the week to July 30, while bearish wagers rose to their highest since February, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday
However, speculators increased their bullish positions in Brent futures.
Also in the United States, the weekly oil rig count, an indicator of future production, fell for a fifth week in a row as most independent producers cut spending even though majors were still pushing ahead with investments in new drilling.
Iran's seizure of an Iraqi oil tanker raised some concerns about potential Middle East supply disruptions in the Gulf. Iran's state media reported on Sunday the Iranian Revolutionary Guards seized the ship for smuggling fuel.
Oil Price - August 5
Oil Price - August 5
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - August 5
The Energy Report: Trade Spat Tit For Tat
By Phil Flynn (Aug 05, 2019 08:34AM ET)
A trade war tit for tat is overshadowing bullish fundamentals for the oil market and even with the fact that Iran detained another oil tanker over the weekend. Trade war fallout is shaking down the oil market as China lashes back at the U.S.. After President Donald Trump threatened to slap China with an additional 10% tariff on Chinese goods, China has ordered its state-owned enterprises to suspend imports of all U.S. agricultural products. On top of that, the People's Bank of China set its daily reference rate for the Chinese yuan at 6.9225, the lowest rate since December.
The People's Bank of China (PBOC) attributed the weakening of the currency beyond 7 yuan per U.S. dollar to many factors including measures of unilateralism and protectionism, as well as the expectation of additional tariffs on Chinese goods. "The PBOC has the experience, confidence and capability of keeping the yuan's exchange rate basically stable at a reasonable and balanced level," the PBOC said. Of course, investors in China have to be worried. This obviously breaks the World Trade Organization (WTO) rulers and could cause a flight of capital out of China. The move will undoubtedly inspire tougher sanctions from the U.S.. More than likely the 10% tariff that was previously announced will go to 25%. There may be also new crackdowns on Chinese technology companies. The turmoil and the fear will shake things and the market may overreact but it should find its stability in a matter of days.
Did you ever think you would see the day where Iran seized a tanker and it is not the top story in The Energy Report? Well, today is that day. Reuters reported that Iranian Revolutionary Guards seized an Iraqi oil tanker in the Gulf which they said was smuggling fuel and detained seven crewmen. Iran’s state media reported the seizure on Sunday, in a show of power amid heightened tension with the West. The Iranian provocation is taking a backseat to other news that is still bullish for oil. There is a real risk premium that will be built in. Yet trade war fears are having people give in to fears of slowing demand and seasonal weakness may be offset by continued U.S. crude draws. Saudi Arabia has lowered its price to Asia to pick up some market share.
Natural gas is still in trouble. A big August cool down in the south should allow supply to grow at a hefty pace. Yes, natural gas can go lower and it more than likely will.
By Phil Flynn (Aug 05, 2019 08:34AM ET)
A trade war tit for tat is overshadowing bullish fundamentals for the oil market and even with the fact that Iran detained another oil tanker over the weekend. Trade war fallout is shaking down the oil market as China lashes back at the U.S.. After President Donald Trump threatened to slap China with an additional 10% tariff on Chinese goods, China has ordered its state-owned enterprises to suspend imports of all U.S. agricultural products. On top of that, the People's Bank of China set its daily reference rate for the Chinese yuan at 6.9225, the lowest rate since December.
The People's Bank of China (PBOC) attributed the weakening of the currency beyond 7 yuan per U.S. dollar to many factors including measures of unilateralism and protectionism, as well as the expectation of additional tariffs on Chinese goods. "The PBOC has the experience, confidence and capability of keeping the yuan's exchange rate basically stable at a reasonable and balanced level," the PBOC said. Of course, investors in China have to be worried. This obviously breaks the World Trade Organization (WTO) rulers and could cause a flight of capital out of China. The move will undoubtedly inspire tougher sanctions from the U.S.. More than likely the 10% tariff that was previously announced will go to 25%. There may be also new crackdowns on Chinese technology companies. The turmoil and the fear will shake things and the market may overreact but it should find its stability in a matter of days.
Did you ever think you would see the day where Iran seized a tanker and it is not the top story in The Energy Report? Well, today is that day. Reuters reported that Iranian Revolutionary Guards seized an Iraqi oil tanker in the Gulf which they said was smuggling fuel and detained seven crewmen. Iran’s state media reported the seizure on Sunday, in a show of power amid heightened tension with the West. The Iranian provocation is taking a backseat to other news that is still bullish for oil. There is a real risk premium that will be built in. Yet trade war fears are having people give in to fears of slowing demand and seasonal weakness may be offset by continued U.S. crude draws. Saudi Arabia has lowered its price to Asia to pick up some market share.
Natural gas is still in trouble. A big August cool down in the south should allow supply to grow at a hefty pace. Yes, natural gas can go lower and it more than likely will.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group