Published: Fri, June 22, 2018
Finance | By Gustavo Carr

China’s tariffs on USA oil would disrupt US$1b monthly business

China’s tariffs on USA oil would disrupt US$1b monthly business

The 14 countries in the Organization of the Petroleum Exporting Countries make more money with higher prices, but are mindful of the fact that more expensive crude can encourage a shift to renewable resources and hurt demand.

But it's Iran and Venezuela-founding OPEC members and those most affected by US sanctions and unable to boost production-that are most vehemently opposing an increase in the cartel's production. But, some OPEC members don't want to increase the output since it would put pressure on Oil prices which have already been declining recently, as we mentioned above. The rise in Oil price is due to the production cut in past few years by OPEC. There is speculation that OPEC might undo a deal struck early previous year to limit crude production.

However, the strong dollar seems to have disturbed the assumption as the likely lower demand on account of higher interest rates would mean that oil producing countries would now be struggling to sell their goods in a tighter market.

"Oil prices are reversing this morning's bout of weakness as bottom pickers enter the fray ahead of this week's crucial OPEC/non-OPEC meeting", said Stephen Brennock, analyst at London brokerage PVM Oil Associates.

For technical reasons, any decision to ramp up output also has to be timed not to coincide with Russia's harsh winter, meaning the next OPEC meeting in November would come too late.

OPEC members are set to meet later this week in Vienna to discuss the proposal by Saudi Arabia to end the OPEC/non-OPEC deal to balance the oil market and increase the oil price. The U.S. president repeatedly voiced his dissatisfaction with OPEC through social media accusing the cartel of driving up the oil prices, this consequently caused some turbulence in the market and resulted in Saudi Arabia's reaction.

In an escalating spat over the American trade deficit with most of its major trading partners, including China, U.S. President Donald Trump last week pushed ahead with hefty tariffs on $50 billion of Chinese imports, starting on July 6.

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That was still down $1.23, or 1.9 percent, from their last settlement.

For one, the confrontationist attitude shown by the U.S. government has rattled world currency markets.

OPEC meets June 22 in Vienna to decide on the future of its production cut agreement, which committed the bloc, along with 10 Russia-led non-OPEC countries, to a 1.8 million b/d supply cut.

Iran had been expected to oppose any rise in crude output, but it has now signaled it may support a small increase.

The 14-nation OPEC cartel and its 10 non-member partner nations, including Russian Federation, together account for more than 50 percent of the world's oil supply, giving them huge sway over the global market.

Anxious about the impact of gasoline prices on mid-term elections, the Trump administration is lobbying hard for a surge in production.

Oil analysts were expecting oil prices to touch $100 a barrel mark after Trump imposed fresh sanctions on Iran. If US oil finds it hard to enter China, it would try to find a way to sell in India, the other main consumer.

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