Oil dips in nervous trading as U.S.-China trade war looms

Oil dips in nervous trading as U.S.-China trade war looms

Oil dips in nervous trading as U.S.-China trade war looms

Futures in NY were 0.3 per cent higher following the US Independence Day holiday, remaining near the highest since 2014.

US President Donald Trump took to his Twitter handle to lambast the Organisation of the Petroleum Exporting Countries (OPEC), demanding them to do more to reduce oil prices 'NOW!'

Oil was mixed on Thursday, with USA crude slipping and Brent futures little changed after data showed an unexpected build in United States crude oil stockpiles.

The rise in benchmark US crude prices from a low of less than $30 a barrel in February 2016 to more than $70 in July 2018 has boosted the economies of Texas, Oklahoma, North Dakota and other producing states.

The recent strength in oil prices has, in part, been spurred by a United States announcement that it plans to re-introduce sanctions against Iran, Opec's third-largest producer, from November, targeting oil exports.

On Wednesday, the USA president again accused the OPEC of driving fuel prices higher and urged U.S. allies such as Saudi Arabia to pump more.

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Trump indirectly linked USA foreign policy to his demand, saying the US defends some oil producing countries "for very little" money.

"This must be a two way street", he wrote, adding in block capitals, "REDUCE PRICING NOW!"

Trump, however, is not satisfied with either the current level of oil prices or the announced production increase.

Trump took aim at OPEC for not doing enough to offset the supply disruptions and keep down the oil prices, which have risen to their highest mark in more than three years. Now that prices have rebounded from a low of $30 a barrel in January 2016 to about $75, OPEC and other exporters led by Russian Federation have agreed to slowly increase exports by what will effectively be 700,000 barrels a day now, with another half million barrels later in the year as sanctions on Iran take effect.

It turns out the reason is to be found in an article published moments ago by Al Jazeera, according to which the Saudis "have agreed to U.S. demands to pump more oil", and which quoted the official Saudi Press Agency that Saudi Arabia's cabinet on Tuesday "endorsed the kindgdom's readiness to pump more oil to maintain market balance and stability". Kazempour said. "There are (sic) not that much oil available to respond to your orders; you are hammering on good guys in OPEC, while you are claiming, you are defending them".

Trump in an earlier tweet and in an interview on Fox News last Sunday said he wanted oil exporters to provide an additional 2 million barrels a day of production.

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Energy consultancy FGE on Friday issued a stark warning of looming supply shortages due to USA sanctions against Iran, and because of disruptions elsewhere.

OPEC members agreed June 23 to increase crude oil output by pumping 1 million barrels more daily, but it is still unclear how much of the oil produced would ease off prices in a period-the northern hemisphere's summer-generally associated with high oil demand. "Because the oil market is already in tight supply due to the numerous outages, this would drive worldwide prices (Brent) further up", Commerzbank said in a note.

On February 10, 2016, the price of oil hit bottom at $26.16. And according to Hossein Kazempour Ardebili-the Islamic Republic of Iran's OPEC governor-some of the president's OPEC-bashing tweets will have the effect of increasing oil prices.

Financial institutions and experts have also pointed to Trump for driving up global prices. Further, rising trade war concerns in USA and China too dragged oil prices down, hitting a low of 76.60 levels as of 15:58 hours IST.

Saudi Arabia has notably refrained from saying how big an output increase may happen.

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