TAIFEX launches first energy futures contract Brent Crude Oil Futures

Strait of Singapore

Refiners in China were the top buyers of American crude oil in May, and have been regular importers since the US revived domestic output and exports in recent years.

Beijing has said it may include a 25 percent tariff on USA crude oil imports, although it has not specified a date on which it would include that duty.

The potential trade war between the United States and China comes amid a tight oil market.

The country is one of the biggest oil and gas importers in the world and one of Iran's top clients in Asia.

Asian oil refiners are racing to secure crude supplies in anticipation of an escalating trade war between the United States and China, and as Washington plans tough sanctions against Iran aimed at shutting the country out of oil markets.

The West Texas Intermediate for August delivery rose 0.86 US dollar to settle at 73.80 dollars a barrel on the New York Mercantile Exchange, while Brent crude for September delivery fell 0.28 dollar to close at 77.11 dollars a barrel on the London ICE Futures Exchange.

Although the current list of products caught in the tariff war does not include energy-related products, oil traders continue to monitor the events because Beijing has threatened a 25-per cent tariff on U.S. crude imports.

At 0734 GMT, August WTI crude oil is trading $73.02, up 0.07 or +0.10% and September Brent crude oil is at $77.17, down $0.22 or -0.28%.

A rise in U.S. crude oil inventories C-STK-T-EIA weighed on prices after stocks rose by 1.2 million barrels in the week to June 29, to 417.88 million barrels, according to the U.S. Energy Administration (EIA) on Thursday.

"Things will get worse before they get better on trade... between the US and China", said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

"Because the oil market is already in tight supply due to the numerous outages, this would drive worldwide prices (Brent) further up", Commerzbank said in a note.

Many analysts attributed Friday's rally of US oil price to a "short covering situation" from Thursday's decline.

Tariffs would make USA oil uncompetitive in China.

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".

"Iran's exports are some 2.7-million barrels a day, including condensate", it noted.

Two other sources said South Korea cancelled July loadings of crude and condensate cargoes from Iran as it was uncertain whether the country would receive an exemption from United States sanctions on Iran trade.

Saudi Arabia told the Organization of the Petroleum Exporting Countries that it increased production by nearly 500,000 barrels per day last month.

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