Oil slumps below US$65 as Opec clash looms, trade war escalates

Crude has dropped more than 10 per cent from late May amid signs Saudi Arabia and Russia are seeking to lift output curbs that have eliminated a global surplus and boosted prices. — Reuters pic
Crude has dropped more than 10 per cent from late May amid signs Saudi Arabia and Russia are seeking to lift output curbs that have eliminated a global surplus and boosted prices. — Reuters pic

TOKYO, June 18 — Oil fell below US$65 (RM259.87) a barrel as Saudi Arabia and Russia prepared for a clash with allied crude producers over whether to lift output and as China and the US exchanged trade threats.

Futures in New York dropped as much as 1.8 per cent, on course for the lowest close since April 9, after a 2.7 per cent decline Friday.

Iran says Venezuela and Iraq will join it in blocking a proposal to increase production that’s backed by Saudi Arabia and Russia when Opec and its allies meet in Vienna this week.

China said it would impose tariffs on a variety of US goods, including crude and gasoline, in response to President Donald Trump’s US$50 billion levy on Chinese imports.

Crude has dropped more than 10 per cent from late May amid signs Saudi Arabia and Russia are seeking to lift output curbs that have eliminated a global surplus and boosted prices.

Meanwhile, traders are trying to digest the impact from both the US and China issuing tariffs on goods and the threat of a broader trade war between the world’s two largest economies.

“Oil is down in a knee-jerk reaction to possibilities of a trade war intensifying between the US and China, and Opec’s production increase easing the demand and supply balance,’ Takayuki Nogami, chief economist at state-backed Japan Oil, Gas & Metals National Corp, said by phone from Tokyo.

“If the US and China continue to retaliate and Saudi Arabia and Russia keep signaling a production increase, that will further weigh on prices.”

West Texas Intermediate crude for July delivery fell as much as US$1.15 to US$63.91 a barrel on the New York Mercantile Exchange and traded at US$63.93 at 10:55 am in Tokyo.

The contract declined US$1.83 to US$65.06 on Friday. Total volume traded was about 11 per cent below the 100-day average.

Brent futures for August settlement lost as much as 44 cents to US$73 a barrel on the London-based ICE Futures Europe exchange.

The contract dropped US$2.50 to US$73.44 on Friday.

The global benchmark crude traded at a US$8.96 premium to WTI for the same month.

Trading on the Shanghai International Energy Exchange is closed for a Chinese public holiday. The contract fell 0.2 per cent on Friday.—Bloomberg

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