NEW YORK (Reuters) – Oil prices fell more than 1 percent on Friday after U.S. President Donald Trump threatened new tariffs on China, reigniting fears of a trade war between the world’s two largest economies that could hurt global growth.
Trump said on Thursday he had ordered U.S. trade officials to consider tariffs on an extra $100 billion of imports from China, escalating tensions with Beijing.
“The heightened possibility of an outright tariff war is conjuring up images of slowed economic growth that could curtail the strong oil demand that has helped to revive a strong pricing environment during the past couple of months,” Jim Ritterbusch, president of Ritterbusch and Associates, said in a note.
U.S. West Texas Intermediate (WTI) crude futures fell $1.27 to $62.27 a barrel, a 2.0 percent loss.
Brent crude futures fell 98 cents to $67.35 a barrel, a 1.4 percent loss, by 11:28 a.m. EDT (1528 GMT).
Both are headed for their biggest weekly fall since early February.
U.S. stock indexes also fell on trade war jitters, which weighed on oil prices. Crude futures have recently tracked with equities.
Some market participants are still bullish on oil prices, however.
“We’re seeing supply tightness and strong demand,” said Phil Flynn, a senior energy analyst at Price Futures Group in Chicago. “The reality is that the fundamentals are widely bullish.”
The Energy Information Administration (EIA) reported a 4.6-million-barrel draw in U.S. crude inventories last week, compared with analysts’ expectations for an increase of 246,000 barrels.
Also positive for prices, Russian Energy Minister Alexander Novak said that an arrangement under which Moscow cooperates with the OPEC oil group could become indefinite once a current deal to curb oil production expires at the end of the year.
The Organization of the Petroleum Exporting Countries and other large oil producers led by Russia have agreed to curtail their combined output by around 1.8 million barrels per day until the end of 2018 to smooth out bloated oil inventories.
OPEC and its allies should keep the cuts to ensure healthy price levels as a way to boost investment in the industry and avoid a supply and price shock in the long run, Qatar’s energy minister said.
Market participants will be looking ahead to U.S. rig count data to be released at 1:00 p.m. EDT (1700 GMT).