Mubasher: Oil pared gains recorded earlier on Friday after the US tariff hike on $200 billion in Chinese imports were implemented, upping the ante between the world’s two biggest economies and crude consumers, Reuters reported.
Crude markets rallied, with prices advancing by 1% earlier in the day as hopes mounted that the tariff increase would be averted after US President Donald Trump stated that he received a “beautiful letter” from his Chinese counterpart Xi Jinping.
However, with no move from the US administration to halt the hikes, US Customs and Border Protection implemented the new 25% duty on Chinese shipments to the US at 12:01 am Washington time (4:01 am GMT).
At 7:59 am GMT, international benchmark Brent futures rose by 0.51% to $70.75 per barrel (pb), after climbing up to $71.23 pb earlier in the day, while US Nymex crude futures climbed by 0.62% to $62.08 pb, having hit a high of $62.49 pb.
US stock futures dropped and Asian equities pared gains as Beijing vowed to retaliate.
“Oil prices along with most risk assets are moving almost in sync on trade tariff updates,” futures brokerage OANDA senior market analyst Edward Moya was quoted by Reuters.
A collapse in trade between the US and China, the world’s two biggest oil consumers, will probably dent crude demand. Both countries collectively accounted for 34% of the global oil consumption during the first quarter of this year, the International Energy Agency (IEA) said.
In the same vein, worries over the climbing oil supply amid reports of builds in crude inventories as well as the potential impact on demand sent oil prices to drop for the week.
While Brent is on course to post a second weekly loss by 0.6%, Nymex is heading for its third weekly decline of 0.3%.
However, oil markets remained supported as the Organization of the Petroleum Exporting Countries (OPEC) continued to withhold supplies to reduce global inventories.
In addition, crude demand for this year is generally expected to rise. The US Energy Information Administration (EIA) projected that the global consumption would rise by 1.4 million barrels per day (bpd) this year.
