Oil held losses below $67 as global risk assets slid on renewed trade tensions between the U.S. and China as well as political turmoil in Europe, with concerns simmering that OPEC may ease its output curbs.
Futures in New York were little changed, and are down over 7.5 percent since Monday last week. U.S. President Donald Trump said he’s moving ahead with plans to impose tariffs on $50 billion of Chinese imports, boosting friction between the world’s biggest economies. Markets are also being rattled by the prospect that Italy might need a fresh election that could be a referendum on its inclusion in the euro zone, with equities tumbling and volatility gauges soaring.
The market turmoil is weighing on oil after prices erased all of this month’s gains as the prospect of rising output from Saudi Arabia and Russia emerged ahead of a meeting between the Organization of Petroleum Exporting Countries and its allies in June. Investors are also watching U.S. supplies, with Barclays Plc. warning that insufficient American pipeline capacity near a key storage hub in Oklahoma is threatening the flow of oil and could provide a “new shock” for energy markets.
Flight From Risk
“A string of events are adding to uncertainties and spurring a flight from risky assets,” Kim Kwangrae, a commodities analyst at Samsung Futures Inc., said by phone from Seoul. “The European turmoil may push oil lower, and Trump’s move to put pressure on China is making investors ponder what’s next. Meanwhile, investors are eyeing the upcoming OPEC meeting to get a clear idea on any changes to its plans or targets.”
West Texas Intermediate for July delivery slid as much as 0.6 percent to $66.35 a barrel, before paring losses to nudge up 1 cent to $66.74 on the New York Mercantile Exchange at 12:59 p.m. Singapore time. The contract fell $1.15 to $66.73 in the previous session. Total volume traded was about 15 percent below the 100-day average.
Brent futures for July settlement lost as much as 58 cents, or 0.8 percent, to $74.81 a barrel on the London-based ICE Futures Europe exchange. The contract on Tuesday rose 9 cents to $75.39. The global benchmark crude traded $8.40 more than WTI, with the premium in May at the highest monthly average since March 2015.
Trade Friction
Futures were 0.8 percent lower at 459.9 yuan per barrel by the mid-day break on the Shanghai International Energy Exchange. The contract rose 0.2 percent on Tuesday.
The weakness in oil prices is coinciding with a decline in risk assets, as concerns about the renewal of trade tensions between the U.S. and China and the repercussions of Italy’s political turmoil gripped financial markets. Asian equities slid and the yen extended gains. The Cboe/Nymex Oil Volatility Index added 8.4 percent on Tuesday, the biggest increase in a month.
In the latest twist in a trade dispute between the U.S. and China, the White House said it plans to release a final list of targeted imports by June 15 and the tariffs will be imposed “shortly thereafter.” The Asian nation’s commerce ministry responded hours later with a statement, saying it was surprised by the American announcement and remains confident the country can protect its interests.
Meanwhile, Italy’s escalating political turmoil raised fears over the European Union’s cohesiveness. Billionaire George Soros warned of an “existential threat” to the bloc following the prospect of anti-EU, nationalist parties in Italy turning a repeat election into a de facto referendum on its membership of the euro.
In the Middle East, the energy ministers from Saudi Arabia, Kuwait and the U.A.E.’s will meet on Saturday, according to people with direct knowledge of the matter. Oil prices have been falling since last week, when Saudi Arabia and Russia signaled they’ll restore some of the output they halted as part of an accord with 22 other nations to help erode a global crude glut. Most producers weren’t consulted about the proposal to revive supplies.
Other oil-market news:
U.S. stockpiles are forecast to have declined 875,000 barrels last week, according to a Bloomberg survey of analysts ahead of government data on Thursday. Ecuador will argue in favor of keeping the oil cut agreement between OPEC and non-OPEC nations at the June meeting, the nation’s Oil Minister Carlos Perez told reporters in Quito. Enbridge Inc. will cap the amount of oil each shipper may send on the company’s Mainline system based a 12-month rolling average, and shippers wishing to send more than their allotted amount will have to show physical proof that they have the volumes, the company said in a May 24 letter.
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