Oil falls after US tariff threat and as Libyan ports come back on line
London — Oil prices fell on Wednesday after US President Donald Trump threatened to levy new tariffs on China, deepening a trade dispute that could depress energy demand.
The spectre of tariffs on a further $200bn worth of Chinese goods sent commodities lower along with stock markets, as tension between the world’s biggest economies intensified.
Benchmark Brent crude was down $1.50 at $77.36 a barrel by 8.15amGMT, having fallen as low as $77.21. US light crude was down 60c at $73.51.
"Trade concerns have bitten today," said Michael McCarthy, chief markets strategist at CMC Markets. "If these tariffs are introduced there will be an impact on global growth and demand."
The price fall was aided by the news that Tripoli-based National Oil Corporation (NOC) had lifted a force majeure on four Libyan oil ports, saying production and exports from the terminals would "return to normal levels in the next few hours". Libyan oil production fell to 527,000 barrels per day (bpd) from a high of 1.28-million bpd in February following the port closures, the NOC said on Monday.
"The lifting of force majeure at all the Libyan ports will certainly come as relief from a supply perspective, but it remains to be seen how quickly exports can return to normal," said Harry Tchilinguirian, head of oil strategy at BNP Paribas.
Adding to the bearish mood were signs of a possible relaxation of US sanctions on Iranian crude exports. US secretary of state Mike Pompeo said on Tuesday that Washington would consider requests from some countries to be exempt from sanctions due to go into effect in November to prevent Iran from exporting oil.
Washington had previously said countries must halt all imports of Iranian oil from November 4 or face US financial measures, with no exemptions. The US pulled out of a multinational deal in May to lift sanctions against Iran in return for curbs to Tehran’s nuclear programme.
The prospect of sanctions on oil exports from Iran, the world’s fifth-biggest oil producer, has helped push up oil prices in recent weeks with both crude contracts trading near three-and-a-half-year highs.
Supply to the US market has also been squeezed by the loss of some Canadian oil production. US crude inventories fell last week by 6.8-million barrels, according to the American Petroleum Institute (API), an industry group.
Analysts polled by Reuters forecast on average that crude stocks fell by 4.5-million barrels, ahead of government data at 2.30pm GMT on Wednesday. US crude oil production is expected to average more than 12-million bpd late next year for the first time, the US Energy Information Administration (EIA) said on Tuesday.