Oil Faces Weekly Decline on China Tariff Worries
Oil prices are on track for a third consecutive weekly decline as concerns over reduced demand due to President Donald Trump's tariffs on China overshadow the US administration's sanctions on Iran.
Brent crude hovered above $74 a barrel on Friday, down over 3% this week. West Texas Intermediate (WTI) traded below $71.
Trump's tariffs on all imports from China have prompted retaliation from the world's largest oil importer, with measures set to take effect on Monday. The trade conflict has raised concerns about its potential impact on crude demand growth and a potential glut later in the year.
Despite Trump's pledge to increase US oil production, the sanctions on Iran could limit supply from the OPEC member. However, analysts note that China, the primary destination for most of Iran's remaining oil exports, could potentially factor into the ongoing US-China tariff dialogue.
The oil market has experienced volatility this week, initially surging on Monday due to impending sanctions on Canada and Mexico. However, prices retreated following the announcement that the measures had been delayed. Escalating tensions with China have further eroded prices.
Physical markets are also showing signs of weakness. Crude prices in Europe have fallen to multi-month lows due to refinery maintenance, while the Brent timespread has narrowed to a backwardation of 44 cents a barrel, down from $1 late last month.
Technical indicators suggest that the recent decline may have been excessive, with the nine-day relative strength index approaching oversold levels near 30.