Oil Prices Up on Weak US Crude Inventory

Strait of Singapore

REUTERS Henning Gloystein File

So far, WTI's relative resiliency is not something that would please US president Donald Trump, who in tearing up the nuclear deal with Iran and reimposing sanctions against the Islamic republic, is betting that Saudi Arabia and other countries will not only make up for the shortfall in Iranian crude exports but also flood the market with enough product to reduce gas prices at the American pump. -China tit-for-tat on trade.

Shares of top oil marketing companies led the gains on NSE index, as US-China trade war fears weighed on oil prices. Brent crude futures were down 7 cents, or 0.1 per cent, at $77.32. China's Ministry of Commerce stated that it had no choice but to respond to the USA, which they claim had "launched the largest war in economic history".

On Wednesday, Iran's deputy commander of the Sarollah Revolutionary Guards responded to Trump and said Iran would close the Strait of Hormuz at the sign of any attempts to thwart Iran's oil exports.

And amid an escalating tit-for-tat war between Trump and Xi in which neither leader is even remotely close to crying uncle, industry participants expect the tariff to be levied, a move which would make future purchases of United States oil uneconomical for Chinese importers.

As part of the retaliatory response, Beijing has threatened a 25 percent tariff on USA crude imports, although it has not specified an introduction date.

An executive from China's Dongming Petrochemical Group said he expected Beijing to soon impose the tariff on U.S. oil imports.

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China says it will immediately retaliate, and U.S. President Trump said on Thursday he may ultimately impose tariffs on more than a half-trillion dollars worth of Chinese goods. "We will switch to either Middle East or West African supplies", he said. "They (Chinese importers) are not going to be intimidated, or swayed by US sanctions".

"Shale crude is not an alternative to Iranian crude", Fielden said.

OPEC, Russi and other producers agreed in June to a modest increase in output to dampen oil prices, which recently hit 3-1/2 year highs. By some estimates, about 1.7 to 2 million bpd of crude and condensate would be cut out of markets once the sanctions are implemented. Together three three nations make up about 60 percent of the Persian Gulf state's exports.

Crude oil could surge to more than $120 a barrel, according to Bank of America Merill Lynch analysts, if the Trump administration were to order a complete cutoff of Iranian barrels before the end of the year.

China responded promptly and slapped duties on the same amount of value unto United States products.

The flipside is that since less Iranian oil exports will go unused, it may provide a solace to the U.S. consumer facing the highest gas prices in four years.

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