China’s threat to retaliate in the trade war is followed by drop in oil prices

Image: Business World

After the United States slapped tariffs on China which will come into play from the 23rd of August, China retaliated by threatening to do the same. They might impose a 25 percent tariff on about $16 billion worth of goods, the same amount that the States decided for China.

However, the US decision has caused a fall in the price of oil in the country. The main factors responsible for it are weak Chinese import data, a smaller-than-anticipated drop in American crude stockpiles and of course, the progressing trade war between the two countries. U.S. West Texas Intermediate (WTI) crude futures ended Wednesday’s session at a seven-week low, dropping $2.23, or 3.2 percent, to $66.94.Front-month Brent crude oil futures fell $2.40, or 3.2 percent, to $72.25 a barrel by 2:20 p.m. ET, after hitting a three-week low at the bottom of the session.

John Kilduff, founding partner at energy hedge fund Again Capital said that WTI fell down to a low of $67 on Wednesday after failing to break through $70 a barrel numerous times this week. “If we get below $66 here, you’re arguably violating the long-term uptrend channel,” he said, referring to technical levels that support U.S. crude’s upward course this year. Concerns are being raised that the economic growth all over the world will slow, which will subsequently lower the demand for crude oil everywhere. Andrew Lipow, president of Lipow Oil Associates said, “It’s certainly going to impact on movement between the U.S. and China, making it less efficient, meaning pressure on prices here.” Fuel oils, diesel and other petroleum products are included in the list of US goods released by China which will be imposed with tariffs. Traders were also analyzing weekly data on U.S. crude stockpiles, which showed inventories falling by 1.4 million barrels in the week of 3rd August.

Further developments in the trade war will determine the extent and impact of these changes in the oil prices.


*Neha Hardikar is a Research Intern at The Kootneeti

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