Mubasher: Oil prices on early Friday fell driven by concerns that an intensified trade friction between Washington and Beijing would hamper economic growth and fuel demand, despite the re-introduction of sanctions against Iran.
Earlier in the day, US Nymex crude went down 0.3% to $66.59 pb, from their last close, as international Brent crude traded at $71.88 per barrel (pb), declining by 0.3% from their last session.
By 7:26 am GMT, Nymex futures fell 0.58% to $66.42 pb, while Brent crude futures went down 0.74% to $71.54 pb.
Nymex is on the track to record a weekly loss of about 3%, while Brent is expected to drop 2%.
The market seems to be focused on fears of reduced demand from China, partially due to the effects of the trade wars between China and the US,” Australia’s Rivkin Securities investment analyst William O’Loughlin told Thomson Reuters.
Beijing recently announced that it would levy further 25% tariffs on $16 billion in US imports.
Although the raft included refined products and liquefied petroleum gas, instead of crude, oil imports incoming from the US into China will still substantially drop.
Chinese refiners are already abstaining from US oil, despite escaping tariffs, according to Australia and New Zealand Bank (ANZ).
Escalating trade spat resulted in a significant slide in the currencies of emerging economies in Asia, such as India and China, leading to a more expensive crude shipments, which are traded in US dollars, as waning demand looms.
“The major devaluation of many emerging market currencies relative to the U.S. dollar means that in local terms oil is higher than what we see on the screen,” US investment bank Jefferies told Reuters.
However, crude supplies from Iran are set to be curbed with the reinstatement of US sanctions against Tehran, the second tranche of which would include oil exports as from 4 November.
Despite opposition to sanctions from European Union, India and China, many countries are expected to yield to US pressure to cut their crude purchases from Iran.
The drop in Iranian crude shipments are set to range between 500,000 barrels per day (bpd) and 1.3 million.
While the decline in exports relies on whether key importers of Iranian oil will be granted sanctions waivers, it remains unclear whether China, the largest consumer of the country’s crude in Asia would heed US pressure.