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Additional Chinese Tariffs Lead to Oil Slip

April 4, 2018 at 16:17 by Matt Jackson

Oil slipped to a two-week low after it was announced that China was imposing additional tariffs on US imports.

Oil futures had regained some lost ground by the end of trading on Tuesday, but these gains were demolished on Wednesday trading, with Brent crude futures slipping to $67.05 a barrel, a drop of $1.07 at 14:00 GMT. US WTI crude futures also fell, down $1.14 to $62.37.

The threat of a possible rise in US inventories had already seen oil prices come under pressure, and news that China would impose levies against US imports, including soybeans, planes, and cars, has seen oil prices suffer. China made the latest retaliatory move after the Trump administration announced that they would impose further levies on $50 billion of Chinese imports. The looming trade war has seen stock and commodities prices react, with gold, treated as being a haven for investors when stocks dip, rising on the news. US stocks fell on the open of trading while a host of commodities, including soybeans, also saw their prices follow suit.

Although analysts expect the market to view a trade war as being a longer-term problem, the continued tit-for-tat exchanges between Trump and China are causing concern. Further levies and announcements are likely to affect the markets even further.

Good news for oil investors came later in the day, however, as the Energy Information Administration announced that US crude inventories had declined by 4.6 billion barrels last week. A rise of 1 million barrels had been expected, and the news of reduced supply helped halt the daily decline.

At 425.3 million barrels, U.S. crude oil inventories are in the lower half of the average range for this time of year.

Market analysts have also pointed to the skewed long/short ratio of oil, with a net long position of more than 600 million barrels, as being a major concern. If prices dip further and there is a sell-off, sellers will struggle to find buyers, effectively pushing prices further down as investors look to offload their stock.

If you have any questions and comments on commodities today, use the form below to reply.

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