Oil steadies as drilling increases in tight market

Oil steadies as drilling increases in tight market

Oil slipped toward $77 a barrel on Friday, under pressure from higher Saudi production and trade tensions between the United States and China, although oil supply disruptions lent support.

Beijing has threatened a 25 percent tariff on USA crude imports, although it has not specified a date. Meanwhile, Washington's new sanctions against Tehran are due to kick in from November. On the green territory, the other metals are traded, with copper and platinum being the biggest increase in price - by 1.63% and 1.26% respectively. -China tit-for-tat on trade.

"We're headed for an unparalleled trade conflict between the world's largest economies", said Stephen Innes, head of trading for Asia/Pacific at brokerage Oanda.

China has said it will retaliate, and major Chinese ports have already delayed clearing goods from the United States, according to several sources.

While the general consensus among analysts is that Trump's gamble won't pay off and global supplies will tighten, there is ample evidence to argue that a combined effort by the Saudis along with Russian Federation and US will be more than enough to offset losses.

John Driscoll, director of consultancy JTD Energy, suggested that China may even replace American oil with crude from Iran: "They [Chinese importers] are not going to be intimidated or swayed by US sanctions".

US crude oil is not on the list of 545 products the Chinese government has said it would immediately retaliate with in response to American duties.

An additional fact to consider: Tariffs would make US oil uncompetitive in China.

While no date has been set, industry participants expect the tariff to be levied. He added that the country's oil production and exports had not changed just because of USA pressure.

He added that his refinery had canceled US crude imports and would switch to Middle East or West African supplies instead.

"Shale crude is not an alternative to Iranian crude", Fielden said. That could lure India to take more USA crude, Fielden said.

Energy consultancy FGE today issued a warning of looming supply shortages due to USA sanctions against Iran, and because of disruptions elsewhere.

Amid the turmoil, some in the region spot opportunity.

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".

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