Oil prices fell sharply on Friday after China unveiled retaliatory tariffs against about $75 billion worth of USA goods, marking the latest escalation of a protracted trade dispute between the world's two largest economies.
Crude oil futures settled lower but off their worst levels of the day, as U.S. WTI ended -2.1% to $54.17/bbl with Brent -1% to $59.34/bbl, after China said it would impose tariffs on $75B worth of additional U.S. products including crude imports.
Brent crude futures were down $1.30, or about 2.2%, at $58.52 around mid afternoon.
Futures fell as much as 3.5% in NY on Friday, erasing this week's gain.
John Coleman, an oil analyst at consultants Wood Mackenzie, noted that the tariff on oil imports would likely "shut off flows from the U.S.to China", leaving exporters to market a rising tide of shale oil to South Korea and Japan.
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Last year, Beijing removed crude from a list of goods targeted for tariffs, signaling the importance of American oil in the global market.
The Central Government is facing the trouble of softening the economy.
"China trade war is another step in the wrong direction, the consequences of which will be felt by American businesses and families", Kyle Isakower, vice president of regulatory and economic policy at the American Petroleum Institute (API), the top lobbying group for US oil and gas drilling, said in a statement.
"It's a direct strike on US crude exports, which is why you are seeing this sort of out-sized reaction", said John Kilduff, partner at New York-based Again Capital LLC. US President Donald Trump said he would offer a response later on Friday.
The Chinese tariffs will take effect in stages between September 1 and mid-December, according to the announcement from the Ministry of Commerce.
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Thus, the UBS team downgraded their investment position on both the energy and information technology sectors to moderate underweight from neutral, adding that slowing global growth and an increase in U.S.
"We still view the U.S".
China, one of the world's biggest crude importers, has sharply lowered United States shipments from a record high hit previous year.
"We urge the Administration to quickly come to a trade agreement with China that would lift all tariffs under Section 301, including the damaging retaliatory tariffs on American energy exports". "That could result in even lower oil demand next year, and an even more oversupplied oil market next year".
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