Oil sets new seven-month low on trade tensions grow

S West Texas Intermediate (WTI) crude futures were down 38 cents. (AFP)
Updated 08 August 2019

Oil sets new seven-month low on trade tensions grow

  • Brent crude futures were down 70 cents

LONDON: Oil prices fell further on Wednesday, extending recent heavy losses as deepening US-China trade tensions weighed on the outlook for the global economy and energy demand.

Brent crude futures were down 70 cents, or 1.2 percent, at $58.26 a barrel in early afternoon trade in London, setting a fresh seven-month low. Prices have lost more than 20 percent since hitting their 2019 peak in April.

US West Texas Intermediate (WTI) crude futures were down 38 cents, or 0.7 percent, at $53.25.

Brent has plunged more than 10 percent over the past week after US President Donald Trump said he would slap a 10% tariff on a further $300 billion in Chinese imports from Sept. 1, sending global equity markets into a tailspin.

“The market continues to grow more uncertain about the demand outlook given the deterioration of trade talks between China and the US,” ING analysts said in a note.

The bank lowered its 2019 price outlook, mostly because of demand concerns, forecasting that global oil supplies will exceed consumption in the first half of next year.

FASTFACT

The price of Brent crude has fallen by about 10 percent over the past week.

Trump on Tuesday dismissed fears that the trade row with China could be drawn out further. His comments failed to prevent shares in Asia from falling for an eighth straight session on Wednesday. London’s FTSE 100 gained.

“We believe that the oil market is now in a phase of exaggeration. Demand is not sufficiently weak to justify the current price performance. Assuming there is no recession, oil demand should continue to see robust growth,” Commerzbank said in a note.

Tensions in the Middle East remain high after Iran seized a number of tankers in recent weeks in the Strait of Hormuz, a major chokepoint for oil shipments.

Saudi Energy Minister Khalid Al-Falih and US Energy Secretary Rick Perry on Tuesday expressed mutual concern over threats targeting freedom of maritime traffic in the Gulf.

“There are concerns that an event could occur at any moment ... the risk might be shifting to the upside in the near term for oil contracts,” said Michael McCarthy, chief market strategist at CMC Markets.

Elsewhere, data indicating a larger-than-expected drop in US crude stocks offered some support to oil prices after several weeks of large draws on inventories.

Official data from the government’s Energy Information Administration (EIA) is due on Wednesday.

The EIA on Tuesday lowered its domestic oil growth forecasts for the year after Hurricane Barry disrupted Gulf of Mexico output in July. Production is set to rise by 1.28 million barrels per day to 12.27 million bpd this year.


EU ‘has upper hand in Brexit trade talks with UK’

Updated 4 min 56 sec ago

EU ‘has upper hand in Brexit trade talks with UK’

PLACE: Irish Prime Minister Leo Varadkar said the EU will have the upper hand in trade talks with the UK as the bloc’s chief negotiator warned of the risk of a disruptive cliff-edge Brexit for business at the end of the year.

Britain leaves the EU on Friday and the two sides will formally begin trade talks in the coming weeks during a “business as usual” transition period that ends in December.

Varadkar, in an interview with the BBC, compared the two sides to soccer teams and suggested that the EU would have the “stronger team” due to its larger population and market. 

He also questioned Prime Minister Boris Johnson’s timetable of striking a deal by the end of the year, the BBC reported.

“The European Union is a union of 27 member states. The UK is only one country. And we have a population and a market of 450 million people,” he told the BBC. 

When asked about Johnson’s aim of getting a deal by the end of 2020, he said: “It will be difficult to do this.”

To get a trade deal, the UK would have to give legal assurances it would not undercut the EU, Varadkar said.

Varadkar met EU chief Brexit negotiator Michel Barnier in Dublin. 

Barnier stressed that the level of access UK products can continue to enjoy will be proportionate to the commitments London makes on EU rules, particularly in relation to state aid.

“It is Britain’s choice,” Barnier told a joint news conference with Varadkar. 

“If we have no agreement, it will not be business as usual and the status quo, we have to face the risk of a cliff edge, in particular for trade.”

Varadkar said there will be have to be some checks on goods going from Britain into Northern Ireland, despite Johnson’s repeated insistence that these will not be needed.

Johnson’s willingness to allow some EU regulations to apply in British-ruled Northern Ireland to prevent the need for a border on the island was the crucial concession he offered last year to obtain a withdrawal deal with the bloc. After agreeing that deal, he called an election and won a strong majority.

Barnier said the EU will “very carefully” watch over the implementation of the agreement’s Northern Ireland protocol. EU officials also expressed concern.

“Trade talks is one thing but there is also the implementation of the Withdrawal Agreement. If the latter doesn’t go well, how could we trust them to meet their obligations under any future FTA (free trade agreement)?” said a senior EU diplomat.

Varadkar himself faces voters in an election on Feb. 8. Polls have shown his Fine Gael party trailing its main rivals, Fianna Fail.