US-China Trade Squabble Shakes Global Oil Prices

Markets around the globe get a jolt from a continuing trade discord between China and the US, but more uncertainties loom on the horizon as a rift between the two economic powerhouses drags oil prices down.

Oil took a huge slide on Friday even as positive employment news in the US was not enough to prevent a drop sparked by US President Donald Trump's worsening trade dispute with China.

Prices of oil plunged over 7% after Trump bared on Twitter that the US would start charging 10% tariffs on $300-billion worth of Chinese products in September.

The major collapse in prices was Brent's largest in more than 3 years and West Texas Intermediate's (WTI) in more than 4 years, underscoring the world markets' widespread concerns. Late Friday, oil made a quick rally with Brent trading at $61.88 and WTI at $55.65/barrel.

Trump's latest tweets fanned more jitters about a world economic slowdown, adding to an already growing perception of a major turmoil seen to hamper growth in global oil demand with new tariffs down the line, "undermining sentiment in world crude oil," Marshall Steves, IHS Markit energy analyst, said.

Ongoing talks between Chinese and US trade diplomats are scheduled to resume in Washington in September. Trump and his administration have already imposed new tariffs on $250-billion worth of Chinese produce back in May, with Beijing imposing new tariffs of its own on $60-billion worth of American-made products.

An escalation in the trade conflict does not bode well for the world markets. It is "not good for oil, but it is probably not quite as bad as the markets saw yesterday," Bill O'Grady, chief market analyst at Confluence Investment Management LLC, disclosed.

The US-China trade squabble, in a way, may force the US Federal Reserve to impose more cuts on the interest which would likely boost prices of crude in the world markets. WTI and Brent are projected to trade above $50 and $60/barrel, in the short-term.

Oil prices in early July notched its smallest move in a month since 1991 as the commodity is caught between worries the world economy might weaken and concerns that further disruptions from oil from the Middle East might arise.

Meanwhile, the wholesale price of gasoline was up $0.029 to US$1.79/gallon and heating oil increased $0.039 to $1.90/gallon, as natural gas dropped $0.09 to $2.11 per 1,000CF.

Precious metal gold climbed $27.71 to $1,445/ounce and silver rallied $0.11 to $16.19/ounce, while copper was down $0.08 to $2.60/pound.