Oil prices drop on possibility of additional US taxes on China

Thursday, September 6, 2018 witnessed a drop in oil prices in the wake of emerging market turbulence and potentially another fresh round of U.S. tariffs on another $200 billion worth of Chinese goods.

U.S. West Texas Intermediate (WTI) crude futures were at $68.59 per barrel at 0645 GMT, down 13 cents, or 0.2 percent, from their last settlement, while Brent crude futures fell by 4 cents, to $77.23 a barrel.

The public comment period regarding the expected U.S tariffs on Chinese goods, which ended on Thursday, left the traders under the impression that U.S President Donald Trump will most probably impose the additional taxes.

Moreover, while the Asian stock market sets out on a selling spree for the sixth consecutive session, the losses continue to influence the prospects of global economic growth, prompting a dip in oil prices as investors are worried that demand for the commodity may take a hit in light of these events.

U.S sanctions against Iran, on the other hand, which are expected to be imposed from November, are likely to prevent further falls in the price of this major commodity, according to some traders. Others, however, have a different take on the subject.

Putting things in context, OPEC had revealed that it expects global oil demand to exceed 100 million barrels per day for the first time this year.

To add to that, U.S crude stockpile fell last week, due to high consumer demand. Crude inventories dropped by 1.17 million barrels to 404.5 million barrels in the week to August 31st.

According to Fawad Razaqzada, an analyst at future brokerage Forex, “The prospects of increased supply from OPEC and its allies, and weaker demand from China and other emerging markets could weigh further on oil prices going forward, or at least limit the upside potential.”

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