Oil Resumes Drop as Demand Fears Overshadow Iran Tanker Seizure
China’s yuan weakens past 7 a dollar for first time since 2008
WTI crude falls as much as 1.8%, extending last week’s slide
By Alex Longley
Oil resumed its decline as a sharp drop in the Chinese yuan compounded fears that a deepening trade war will depress demand.
Futures lost as much as 1.8% in New York. The yuan weakened beyond 7 a dollar for the first time in more than a decade after U.S. President Donald Trump said Friday he could raise tariffs on China to a “much higher number.” His threat the day before to increase levies spurred the steepest one-day slide in crude prices in more than four years. The trade outlook countered concern over Iran’s seizure of another foreign tanker in the Persian Gulf.
European stocks and U.S. equity futures slumped on Monday amid the escalating tension between the world’s two largest economies, as China’s move to let the yuan weaken stoked fears of a currency war. Investors are awaiting speeches from Federal Reserve policy makers this week after Chairman Jerome Powell said last month’s rate cut didn’t signal the start of a lengthy easing cycle.
“The oil market is taking its cues from a pullback across the risk-asset complex as trade-war concerns dampen the outlook for global oil demand,” PVM Oil Associates analysts including Tamas Varga wrote in a report.
West Texas Intermediate oil for September delivery fell 82 cents, or 1.5%, to $54.84 a barrel on the New York Mercantile Exchange as of 8:43 a.m. local time.
Brent for October settlement declined 91 cents, or 1.5%, to $60.98 a barrel on the ICE Futures Europe Exchange, and traded at a premium of $6.12 to WTI for the same month.
Trump said Thursday he would impose a 10% tariff on a further $300 billion of Chinese imports, before saying the following day that the levies could be raised even further. China’s response has roiled global markets.
Separately, the ship taken by Iran’s Revolutionary Guards on July 31 was carrying around 4,400 barrels of smuggled fuel when it was seized near Farsi Island off the country’s southwestern coast, Sepah News reported. Iran subsequently said it wouldn’t overlook any violations by ships in the Persian Gulf.
Other oil-market news:
Saudi Arabia lowered pricing for September sales of all crudes to Asia, while raising prices for buyers in northwest Europe and the Mediterranean region.
Reports alleging that fuel tankers appeared to breach U.S. sanctions against Iran were cited in court filings by a bank as it sought to seize the ships, accusing the owners of loan default.
Short-sellers raised their bets on falling U.S. crude prices just in time for Trump to send the market on its biggest collapse since 2015.
With assistance from James Thornhill, Heesu Lee and Tsuyoshi Inajima.
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