Crude oil prices fell in roller coaster-like trading Wednesday, impacted by equity markets, as China signaled it’s prepared to raise the stakes in the trade war with the U.S., raising concerns such a situation could hurt demand.
Supply constraints linked to Opec+ and political tensions in the Middle East offered support, Kallanish Energy reports.
Brent crude futures were at $69.46 a barrel, down 66 cents, or 0.9%, having hit a session low of $68.08/Bbl. U.S. West Texas Intermediate crude futures fell 0.6%, to $58.81/Bbl, after hitting a low of $56.88/Bbl, the lowest level since March 12.
Both contracts were set for their first monthly decline in five months.
China could use its rare earth position
China intimated it’s ready to use its dominant position in rare earth elements to strike back in a trade war with the U.S., Chinese newspapers warned Wednesday.
Rare earths are a group of 17 elements used in everything from high-tech consumer electronics to military equipment.
While China has so far not explicitly said it would restrict rare earths sales to the U.S., Chinese media has strongly implied this will happen, Reuters reported.
Flooding causes serious impact
In the U.S., cash crude markets in Cushing, Oklahoma, and fuel markets in the area have been impacted this week by pipeline outages and disruptions due to once-in-a-century flooding in the Midwest.
The front-month spread between July and August U.S. crude futures weakened to trade at the widest level in more than two months. Trading in the spread is closely tied to supply and demand at Cushing, the delivery point for U.S. crude futures.
U.S. crude oil inventories were forecast to have drawn down last week, after climbing to the highest levels since July 2017 a week earlier due to near record high production and lower refinery runs in the Midwest.
Inventory data due today
Weekly U.S. oil inventory data has been delayed by Monday’s Memorial Day holiday, with the government’s weekly report expected Thursday.
Despite these concerns dragging on oil markets, crude prices remain supported on overall supply tightness.
Iranian May crude exports fell to less than half of April levels, to roughly 400,000 barrels per day (Bpd), tanker data showed and two industry sources told Reuters, after the U.S. tightened sanctions on Tehran’s main source of income.
July Brent crude futures were trading at roughly $1.50/Bbl above the August contract, known as backwardation, which points to a tight market.
Adding to the support are hopes supply cuts totaling 1.2 million barrels per day (Mmbpd) by members of Opec+, which includes most Opec members along with a number of non-Opec producers led by Russia, implemented at the start of the year to prop up the market, would be extended in a meeting next month.
This post appeared first on Kallanish Energy News.