Oil dips in nervous trading as US-China trade war looms

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

The tightness at Cushing and the potential increase in Gulf exports "both have implications for how quickly the prompt overhang in the market can clear, and thus provide some direction for prices", Chauhan said.

Oil prices fell early on Friday along with stock markets.

Crude oil could surge to more than $120 a barrel, according to Bank of America Merill Lynch analysts, if the Trump administration were to order a complete cutoff of Iranian barrels before the end of the year. USA crude futures added 34 cents, or 0.5%, to $74.14. While U.S. 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, China has threatened a 25% duty on imports of U.S. crude which is listed as a U.S. product that will receive an import tariff at an unspecified later date.

London-based Brent Oil Futures for delivery in September were also higher, up 0.47 percent, traded at $77.48 per barrel.

But the USA oil market is still tightening.

As part of the retaliatory response, Beijing has threatened a 25 percent tariff on US crude imports, although it has not specified an introduction date.

American crude shipments to China now stand around 400,000 barrels per day (bpd), worth $1 billion a month at current prices. While OPEC is facing mounting pressure from Trump to do more, America's sanctions on group members Iran and Venezuela are adding uncertainties, just as USA tariffs on Chinese goods kick in on Friday. "We will switch to either Middle East or West African supplies", he said.

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Energy consultancy FGE warned on Friday of looming supply shortages due to United States sanctions against Iran, and because of disruptions elsewhere.

It estimated that once US sanctions are fully implemented, some 1.7 to 2 million bpd of crude and condensate would be taken out of the market.

US energy companies last week increased the number of rigs drilling for oil by five to 863, up 100 year-on-year, General Electric Co's (GE.N) Baker Hughes energy services firm said in a report on Friday.

USA investment bank Jefferies said on Friday it expected a decline in Iranian exports "well in excess" of 1-million barrels a day due to the USA sanctions.

The oil sanctions come after Opec and other supply-cutting countries agreed at a summit in June to reduce compliance from more than 150 per cent in May to about 100 per cent starting this month.

"It is possible the kingdom could lift production by another 1.3 million-1.4 million bpd beyond anything it has ever produced before but at the moment there is no way of knowing for certain", Reuters added.

Although Saudi Arabia and Russian Federation have said they would raise output to make up for disruptions, FGE said “there simply is not enough capacity to make up for Iran's crude losses, plus Venezuela and Libya”, and warned of the possibility of oil prices rising to $100 per barrel.

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