Oil Prices Fall after the US Declares New Round of Tariffs

Oil prices declined on Wednesday, as the commodity market gets hit with the US’ plans to impose another round of tariffs on Chinese goods, and as the country eases its stance on the Iran sanctions.

International benchmark Brent crude futures for September delivery was down 2.2 percent to $77.12 per barrel, while West Texas Intermediate (WTI) crude futures for the August contract fell 0.5 percent to $73.72 per barrel.

Chief Market Strategist Michael McCarthy said trade concerns have bitten today and the reason is that the situation is above and beyond what the market was expecting.

US Prepares New Tariffs on Chinese Goods worth $200 Billion

Markets were rattled after President Donald Trump’s administration ramped up its trade dispute further with China by threatening to levy 10 percent tariffs on $200 billion worth of Chinese imports, including seafood and other fresh goods.

Trump had warned earlier that they might eventually impose tariffs on more than $500 billion worth of Chinese products.

The announcement came a few days after the two countries implemented tariffs on $34 billion of each other’s goods.

China’s Commerce Ministry on Wednesday deemed Washington’s announcement of the new measures to be unacceptable, stating that China would have to respond with necessary countermeasures.

The recent US tariffs would be the third wave, as the Trump administration is already working on a second wave of tariffs on Chinese products worth $16 billion. The tariffs are expected to go into effect sometime after August 30.

US Could Issue Waivers to Iran Oil Sanctions

Further adding to crude prices’ bearish mood was also news of the White House considering granting sanctions relief to some countries buying oil from Iran.

US Secretary of State Mike Pompeo stated on Tuesday that come November 4, there will be a US sanction that prevents crude oil from passing from Iran to other countries.  

The US retreated from a multinational agreement in May to withdraw limits against Iran in exchange for sanctions to the country’s nuclear program.

The announcement was significantly different from Washington’s remarks a couple of weeks ago, which called for countries to stop all imports of Iranian oil from November 4, or be subjected to US financial measures, with no exemptions.

The report could mean that investors’ concern over the loss of Iranian crude may be less than they initially expected, dampening the outlook for a major global supply shortage, overshadowed news about a fresh supply outage.

The prospect of curbs on oil exports from the world‘s fifth-largest oil producer has helped lift oil prices in recent week, with both crude contracts trading near 3-1/2 year highs.

Some losses in Canadian oil output has also capped supply to the US market, with the American Petroleum Institute (API) showing that US crude inventories dropped by 6.8 million barrels per day (bpd) in the previous week.

The US Energy Information Administration (EIA) forecasts the country’s crude production to average more than 12 million bpd in late 2019 for the first time.     

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