Oil prices edge up, U.S.-China trade war in focus

Trump’s order for OPEC to reduce prices is insulting – Iranian oil minister

Trump’s order for OPEC to reduce prices is insulting – Iranian oil minister

Brent crude futures LCOc1 were down 7 cents, or 0.1 percent, at $77.32. -China tit-for-tat on trade.

Concerns that oil prices will be weighed down by a trade conflict between the USA and China have faded to some extent, analysts said. Brent, the global benchmark, is now trading at around $77 a barrel.

But as is the case with any geopolitical conflict, the smart money always identifies opportunities, and Lee Dal-seok, senior researcher at the Korea Energy Economic Institute pointed out that "If China retaliates with tariffs on US crude, that could improve South Korea's terms of buying USA crude.because the USA would need a market to sell to". The unofficial leader of the Organization of Petroleum Exporting countries has never pumped more than 10.6 million barrels per day on average over a single month, according to BAML. "Stringent sanctions on Iran will take both Saudi Arabia and the oil market into the unknown".

In an alarming sign for Washington, and a welcome development for Iran, some locals have decided not to see which way the dice may fall.

"If China imposes tariffs, their refineries won't buy United States crude since it would cost more", Reuters quoted Sandy Fielden, director of research for commodities and energy at Morningstar Inc, as saying over telephone.

He added his refinery had cancelled US crude orders and would switch to Middle East or West African supplies instead.

An executive from China's Dongming Petrochemical Group told Reuters his refinery had already cancelled USA crude orders: "We will switch to either Middle East or West African supplies".

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

In other news, Iran's oil minister accused Trump over the weekend of insulting OPEC by ordering it to boost production and lower down prices. "You are actually discrediting them and undermining their sovereignty, we expect you to be more polite".

"Iran's exports are some 2.7 million bpd, including condensate", it noted.

Crude oil inventories at Cushing, Oklahoma, the delivery point for USA crude futures, have fallen to their lowest in 3-1/2 years, data showed last week.

While next steps remain unclear, the potential outcome for the U.S. isn't: should China fully pivot away from United States exports and replace them with Iranian product, the USA trade deficit will resume rising, further adding to the pressure of what is Trump's biggest economic hurdle: the double USA deficits.

Oil prices surged to their highest level in more than three years this week, sending the price of a barrel of oil up to $74.15, the highest price since November 26th of 2014.

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