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Oil shakes off tariff woes as US sends warships to Middle East
[SEOUL] Oil held gains above US$62 a barrel as heightened tensions in the Middle East overshadowed a US plan to raise tariffs on Chinese goods.
Futures were steady in New York after closing up 0.5 per cent on Monday. The US is sending an aircraft carrier strike group and bomber force to the oil-rich region amid rising tensions with Iran, which has threatened to block the Strait of Hormuz. That buoyed crude prices, which were down more than 3 per cent at one point on Monday, and outweighed news that the White House will raise levies on Chinese goods on Friday, threatening the global growth outlook.
Oil's rally has gone into reverse in the last couple of weeks on speculation Saudi Arabia and other producers will pump more to make up for lost Iranian barrels. American drillers have also boosted output to a record and nationwide stockpiles climbed to the highest since September 2017. Meanwhile, the sudden deterioration in US-China trade relations are souring a demand outlook that had been improving over the last couple of months.
"Oil prices got off the mat after geopolitical tail risks took another notch higher," said Stephen Innes, head of trading at SPI Asset Management. "With US browbeating stepping to the fore, oil prices quickly recovered from yesterday's tumult."
West Texas Intermediate crude for June delivery was little changed at US$62.24 a barrel on the New York Mercantile Exchange at 11:27 a.m. in Singapore (GMT+8). The contract has lost around 6 per cent since reaching the highest level in almost six months on April 23.
Brent for July settlement lost 11 US cents to US$71.13 a barrel on the London-based ICE Futures Europe exchange after falling as much as 31 cents, or 0.4 per cent, earlier. The contract settled 0.6 per cent higher at US$71.24 on Monday. The global benchmark crude was at a premium of US$8.78 to WTI for the same month.
US National Security Advisor John Bolton said in a statement the deployment of the bomber force and USS Abraham Lincoln Carrier Strike Group would send an "unmistakable message" to Iran, and that the US is prepared to respond to any attack. Any blockage of the Strait of Hormuz, the choke-point for shipments from the Persian Gulf, could be very disruptive to oil flows.
US President Donald Trump's top trade negotiator accused Beijing of backpedalling on commitments it made during negotiations as he announced that tariffs would be raised. Still, talks will continue and a Chinese delegation will visit Washington on Thursday and Friday, said US Trade Representative Robert Lighthizer.