Oil prices fall as US-China trade war clouds demand outlook

Technical chart showing the performance of crude oil prices

" Oil markets are in a tug of war as Iran sanctions will continue to provide near-term support, while discussions around global demand in the wake of this morning's tariffs and speculation of further OPEC supply increases should temper upside ambitions", Oanda head of trading Stephen Innes said.

Benchmark Brent crude already is nearing $80 a barrel and some believe it may go even higher.

On the New York Mercantile Exchange, West Texas Intermediate futures edged down 0.17% to $69.73 a barrel.

The trade dispute is raising concerns about the potential for slower growth in oil consumption, offsetting supply concerns stemming from the upcoming US sanctions on Iran.

USA sanctions affecting Iran's oil exports come into force on November 4.

The Organization of the Petroleum Exporting Countries and other producers including Russian Federation meet on September 23 in Algeria to discuss how to allocate supply increases within their quota framework to offset the loss of Iranian supply.

Reuters reported on September 5 that Saudi Arabia wanted oil to stay between $70 and $80 to keep a balance between maximising revenue and keeping a lid on prices until USA congressional elections.

"(Traders took the Saudi comments) as a sign that they (Saudi Arabia) won't be aggressively responding to the rise in prices with supply increases of its own", ANZ bank said in a note on Wednesday.

On Monday, Russian Energy Minister Alexander Novak said all possible scenarios for oil output could be discussed at a meeting of OPEC and non-OPEC states in Algeria this month.

OPEC with a group of non-OPEC producers that includes Russian Federation started withholding oil supplies in 2017 to end a global glut and prop up prices.

U.S. crude futures were up $1.08 at $70.93 a barrel by 11:15 a.m. [1515 GMT], after the U.S. Energy Information Administration said crude and gasoline stockpiles fell last week.

Crude inventories fell 2.1 million barrels last week to 394.1 million barrels, the lowest level since February 2015, EIA data showed.

Brent may fall more than $1 to $76.37 a barrel while WTI crude prices may revisit the September 14 low of $67.94, he wrote.

Beijing on Tuesday quickly added $60 billion of USA products to its import tariff list in retaliation for President Donald Trump's planned levies on $200 billion worth of Chinese goods.

Concern over supply overshadowed a surprise increase in US oil inventories.

"Overnight chatter suggests that the Saudis are more than happy with a Brent price above $80 or that OPEC, more generally, is not considering raising output".

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