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Oil Prices Slip on OPEC and Tariff Threats

June 19, 2018 at 19:28 by Matt Jackson

Oil prices slipped back a little on Tuesday, as an OPEC report has found that the oil market remains strong and could potentially cope with the supply disruptions that are expected when sanctions against Iran and Venezuela come into full force. The increased threat of a trade war between the USA and China may have also helped peg prices back today.

The threat of a trade war between China and the USA has renewed afresh. The USA imposed steel and aluminium tariffs, designed to levy charges against China, who allegedly force foreign businesses to share their intellectual property if they wish to do business in the country. Following the announcement of the initial round of levies, China responded with levies of equal size. If the spat continues, it may lead to the countries preventing investment from the other, and may lead to a global issue.

China has said that they will impose tariffs on US oil, and will get their supply from OPEC nations instead. In fact, it is possible that they could end up buying from Iran. Not only would this mean avoiding buying from the US but it would undermine their efforts to impose financial sanctions against the country.

Also affecting the oil market is the impending OPEC+ meeting due to take place on Friday June 22. OPEC and Russia will meet to discuss whether to continue with a supply restriction deal they have in place, or if they will increase oil supply by cutting restrictions. There are two sides to the debate with Iran, Venezuela, and Iraq all opposing lifting the supply restrictions that have been placed on oil, but the likes of Saudi Arabia and Russia being open to the idea. If the dispute causes major fractions in the group, it could even lead to the eventual dissolution of OPEC.

WTI crude has fallen 1.11% to $64.96 while Brent crude slipped 0.2% to $75.19.

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

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