Oil slipped on concern that an escalating trade dispute between the U.S. and China will dampen global growth at a time when American crude inventories are growing.
Futures slid 0.5% to trade below $67 a barrel in New York, after a decline of 0.8 %on Monday. The U.S. is said to prepare another round of tariffs on all remaining Chinese imports if talks between the presidents of the two countries fail to ease trade friction. Meanwhile, American crude stockpiles are forecast to have risen for the sixth straight week.
Crude has retreated almost 9% this month, the worst monthly decline since July 2016. While ongoing trade tensions between the world’s two largest economies stoke concerns over global energy demand, traders continue to watch how much Iranian supply will be taken out of the market when U.S. sanctions hit early next month.
According to Naervig Pedersen, a senior analyst at Danske Bank in Copenhagen, “Investors have become wary of the global economic outlook. Saudi Arabia has pledged to raise output, and together with rising U.S. stocks, has eased supply concerns in the market.”
In case a planned meeting between presidents Donald Trump and Xi Jinping yields no progress on the sidelines of a Group-of-20 summit in Buenos Aires next month, U.S. officials are preparing a new list which would apply to the Chinese products that aren’t already covered by previous rounds of tariffs.
However, the OPEC’s oil exports have decreased by 0.8 million barrels a day (mb/d) to 24.8 mb/d in October, the lowest monthly level since April of last year. The decline was partly due to Iran, while Venezuela and Libya have also contributed to the decline. Iran exports have fallen by 1 mb/d and could fall by another 1 mb/d or more depending on whether the U.S. can convince India, and China to comply with the sanctions.