US oil prices fell just under 2 per cent on Friday after US President Donald Trump threatened to tariff more imports from China, reigniting fears of a trade war between the world’s two largest economies.  Anadarko photo.

OPEC deal compliance buoyed oil prices during Trump trade turmoil

Oil prices fell on Friday as investors’ concerns about a trade war between the United States and China grew after US President Donald Trump ordered US trade officials to consider slapping tariffs on an extra $100 billion on imports from China.

The move escalated tensions between the US and China and has left some analysts wondering if China will put tariffs on US crude.

“There is a risk for oil prices that China uses the bazooka option it has on U.S. crude oil exports. China is the main importer (after Canada) of U.S. crude oil, to the tune of about 400,000 barrels per day,” according to oil market service firm Petromatrix.

“If China was to impose counter tariffs on U.S. crude, it would become quickly very heavy for the U.S. supply and demand picture, resulting in U.S. crude oil price pressure that would have a negative impact on global oil prices.”

By 12:27 p.m. EDT, US WTI had dropped 2.01 per cent to $62.26/barrel and Brent $1.05 to $67.28/barrel.  The Canadian Crude Index fell 84 cents to $45.19.

Oil prices are heading for their worst week in over a month.

On Wednesday, the US Energy Information Administration reported a surprise draw in US crude stocks of 4.6 million barrels.  Analysts polled prior to the release of the data  had expected crude stocks to rise by 246,000 barrels.

But the Trump tariff threat left the market in a bearish mood.

“Any meaningful change to the perception regarding future trade issues will most likely trump the potential effects of short-term variations to oil fundamentals,” Reuters reports JBC said.

On Friday, Baker Hughes reported the US oil rig count had risen by 11 and now sits at 808, up 136 from this time last year.  In Canada, the oil rig count dropped by 23 to 48 and is higher than the Canadian rig count of 42 at the same time last year.

After speculation that Saudi Arabia would drop crude prices to its Asian customers, Reuters reports the kingdom actually boosted prices for its flagship Arab Light crude which is sold to Asian refiners.

The OPEC supply cut agreement has resulted in a decline in global crude stocks and Russia and the cartel are considering making the agreement last indefinitely.

OPEC’s cuts have boosted oil prices from a low of $27/barrel at the end of 2016.  Qatar’s energy minister said the pact have ensured healthy price levels and will lead to more investment in the oil industry, helping avoid a price shock in the long run.