Published: Fri, August 10, 2018
Finance | By Jaime Brady

Traders Looking to Establish New Balance Points after China Tariffs

Traders Looking to Establish New Balance Points after China Tariffs

"There is room for [prices in] the crude market to soften a bit more", says John Woods of JJ Woods Associates, adding that inventories could rise further as refineries head toward maintenance season after the summer driving season. As a result, more US crude oil would be shipped to Asian market. China, which is already in the midst of a trade tirade with Washington has refuted the U.S. sanctions on Iran.

All the Persian Gulf oil exporters such as Saudi Arabia, Iran, Iraq, Kuwait, Qatar, the UAE, and Bahrain, ship their crude oil to the global market through the Strait of Hormuz.

"Oil has barely made its way above $69 and is struggling to gain further, trading in a tight range, as both the upward and downward elements co-exist, pulling prices from opposite directions", Kim Kwangrae, a commodities analyst at Samsung Futures Inc., said by phone from Seoul.

As part of its most recent retaliation against Washington in the mounting trade dispute, China will impose tariffs of 25 percent on a further $16 billion in USA imports, which will affect trade in goods from fuel and steel products to autos and medical equipment. Along with oil, Asian stock markets also fell on Friday amid heightened global trade tensions, as the world's two biggest economies threaten ever more tariffs on each other's products.

With China, India and Turkey already on board to continue Iranian oil imports, Japan also says it is considering continuing shipments amid warnings that new USA sanctions on Tehran could push prices above $90 a barrel.

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are under pressure early Wednesday after China said it will retaliate against the latest round of U.S. tariffs on Chinese imports.

United States sanctions on Iran's energy sector are set to be re-imposed after a 180-day "wind-down period" ending on November 4.

"The report was negative for prices with the smaller-than-expected drawdown in crude oil inventories and the decent sized rise in refined product inventories", said John Kilduff, a partner at Again Capital Management in NY.

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Goldman Sachs insists we are heading for a "very, very tight oil market".

Iran is the third-largest producer in the Organization of the Petroleum Exporting Countries.

Exports to Japan surged to a seven-month high as refiners rushed to secure as many cargoes as possible before USA sanctions are re-applied.

Official U.S. fuel storage data is due to be released later on Wednesday by the Energy Information Administration (EIA).

Analysts have predicted the sanctions could put more than two million barrels per day at risk.

In the U.S., nationwide crude stockpiles dropped 1.35 million barrels last week, according to the EIA, while supplies stored in the key hub of Cushing, Oklahoma, slid for a twelfth straight week, declining by 590,000 barrels.

"The recent cooling down of the market, with short-term supply tensions easing, now lower prices, and lower demand growth might not last", the IEA, which oversees the energy policies of industrialized nations, said in a monthly report. It fell 3.2 per cent to $72.28 a barrel in the previous session.

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