Oil heads for a fourth weekly drop as trade war fears linger
Pubdate：2018-07-30 10:24
Source：liyanping
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LONDON (Bloomberg) -- Oil was poised for a fourth weekly decline as the unexpected halt in Saudi shipments through a Red Sea waterway failed to add a significant risk premium to prices, while concerns lingered over how the U.S.-China trade spat will affect demand.
U.S. futures headed for a 1.4% decline this week. Trade concerns continue to cloud investor sentiment after the world’s top finance chiefs warned that escalating tensions threatened global growth. Meanwhile, Saudi Arabia temporarily halted oil shipments via the Bab el-Mandeb Strait, a key shipping lane for crude at the southern tip of the Red Sea, after it said two tankers were attacked by Yemen’s Houthi militia.
Oil has lost about 6% this month as a trade battle between the U.S. and China shows no signs of letting up, raising fears it’ll curb demand growth. Investors are also watching political risk to supply after President Donald Trump warned of “consequences” if Iran threatens America.
On Friday, prices were “treading water, really not moving a lot,” said Eugen Weinberg, head of commodities research at Commerzbank AG. “That’s surprising given this temporary closure of the Strait on the Yemen coast. It’s probably due to the fact that most of the geopolitical tensions are priced in.”
West Texas Intermediate crude for September delivery was down 17 cents at $69.44/bbl on the New York Mercantile Exchange at 8:02 a.m. in New York. Total volume traded was 61% below the 100-day average.
Brent for September settlement was down 9 cents to $74.45/bbl on the London-based ICE Futures Europe exchange, on course for a 1.9% gain this week. The global benchmark was at a $5.01 premium to WTI.
Trade frictions
Talks of the trade war dominated discussions during the Group of 20 nations summit last weekend as Trump prepares to slap tariffs on $500 billion of Chinese goods. Finance ministers and central bankers from the G-20 warned of risks including financial vulnerability as well as structurally weak growth, according to a statement published by the group after their two-day summit in Buenos Aires.
Even as the trade spat between the U.S. and the European Union eased, the simmering tensions with China threaten to strain growth in Asia’s largest economy, which grew 6.7% in the second quarter -- the slowest expansion since 2016.
Prices rebounded somewhat in the latter part of the week after two Saudi vessels belonging to the Saudi National Shipping Co., each with a capacity of 2 MMbbl of oil, were attacked by Yemeni Houthi militia. The Bab el-Mandeb Strait, off the shores of Yemen, Djibouti, and Eritrea, connects the Red Sea with the Arabian Sea and is one of the world’s major waterways for crude oil and other petroleum products.
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