Crude oil plunges after Trump tariff threat, Libya ports reopen

Marco Green
July 12, 2018

Brent crude fell $5.46, or 6.9 percent, to settle at $73.40 a barrel. On Wednesday, the contract slumped 6.9 percent in its largest one-day percentage decline since February 9, 2016.

But in the USA stockpiles are falling as refiners suck crude out of inventories to produce more gasoline for drivers in the peak summer season.

Libya's crude oil production plummeted by 254,300 bpd to average 708,000 bpd in June. The sell-off intensified after news of a fall in USA crude oil inventories failed to reverse market sentiment.

"The scope of today's sell-off is unequivocally a speculative washout", said Saucer. Higher gas prices can leave USA households with less money to spend on other products.

The Saudi production boost would have raised OPEC's total production much higher had it not been for the plunge in production in Libya, whose oil ports were closed last month after the battle over oil terminals renewed, another slump in Venezuela's output, and additional decline in Angola's production. A stronger dollar can weaken dollar-denominated commodities, like crude.

"If these tariffs are introduced there will be an impact on global growth and demand", says Michael McCarthy, chief markets strategist at CMC Markets.

The decline in overall inventories was partially due to a fall-off in stocks at the Cushing, Oklahoma, delivery hub for US crude futures, which were down by 2.1 million barrels. Concerns about a lack of spare capacity had led crude to rally.

"Both oil contracts have recently stalled around key long-term and psychologically-important levels at $80 and $75 respectively, as market participants weigh the risks of a potential correction in prices", Fawad Razaqzada, an analyst at FOREX.com, said in a note.

U.S. crude oil production is expected to average more than 12 million barrels per day late next year for the first time, the U.S. Energy Information Administration said in a monthly report on Tuesday.

Due to higher USA oil production, however, higher prices are not necessarily a net loss for the US economy.

Other reports by Click Lancashire

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