Mubasher: Bank of America Merrill Lynch (BAML) expected oil markets to take a downward turn, by more than 50%, Bloomberg News reported.

This was based on the hypothesis that a further deterioration in the ties between the US and China could trigger a series of events that would send the commodity to as low as $30 per barrel (pb).

US President Donald Trump may decide to raise tariffs on the remaining $300 billion in Chinese imports, which would all depend on the outcome of his meeting with his Chinese counterpart Xi Jinping at this weekend’s Group of 20 (G20) summit, BAML global commodities head Francisco Blanch told Bloomberg in an interview.

In response, Beijing may be prompted to devaluate the Chinese yuan (CNY), making crude oil more expensive in the world’s biggest consumer, given that the commodity is priced in US dollars, and thus denting demand growth, Blanch said.

Moreover, China could decide to evade the US sanctions against Iran, and resume its crude imports from the oil-rich nation.

“The trade issue and the Iran issue become the same issue, and that ends up creating a $30-a-barrel scenario for oil prices,” he was quoted by Bloomberg.

With “an extra 2 million barrels from Iran and [collapsing demand,” this would be the likely scenario, he added.

The US bank’s base-case scenario for Brent and Nymex to average $63 and $56 pb, respectively, in the second half of this year.

By 9:57 am GMT, global benchmark Brent futures rose by 1.29% to $65.89 pb, while US Nymex crude futures climbed by 1.82% to $58.88 pb.