Crude oil prices tumbled in the international market amid building U.S. inventory and the decision of President Donald Trump to raise the tariffs on imported Chinese goods.
The oil prices previously fell over the building inventory of crude oil in the United States. The oil inventory rose sharply in April 2019, which in turn, raised concerns among the energy investors of the strengthening global supply chain. With the growing concern over potential supply recovery, the oil prices dived in the international market.
Crude prices embarked an upside journey since the beginning of the year 2019 amid production cut by OPEC and supply disruption caused by global factors such as U.S. Ban on Iran Oil Export, Ban on Venezuela Oil Export, Civil-War in Libya, etc., which in turn created a supply concern in the global market.
However, the gradual build in the United States crude oil stockpiles over the past few months, especially the sudden rise of 7.2 million barrels in March and 9.9 million barrels in April addressed the concerns of crude oil consumers, which in turn, exerted pressure on crude oil prices and the crude prices fell from its top of $75.72 a barrel (Day’s high on 25th April 2019) to the level of $70.17 (Day’s low on 2nd May 2019).
Crude prices recovered slightly from the level of $70.17 to the level of $72 (Day’s high on 3rd May 2019) amid optimism on trade talks. The global economic outlook and economic data started giving positive signs over the progressive trade talks, which in turn, pushed the global demand for crude oil in the past and at present so far.
However, in the recent event, the United States president Donald Trump mentioned on Twitter that he intends to hike the tariff on Chinese goods drastically, which in turn, created a panic in the global market. The crude oil prices reacted sharply over the news and dropped by almost 2% as per the present level of around $69.84 as compared to its previous close.
As per official Chinese sources, Beijing is into consideration of ending the trade talks impromptu with Washington.
Market participants believe that the action from the United States president will again exert pressure on both the significant economies of the world and the fragile global economic conditions could again see a slow trend.
The effect of Trump’s action reflected itself in the currency segment. The USD/CNY pair soared over the dominance enjoyed by the United States as compared to China during the trade war, from the level of RMB6.7325 a dollar (Day’s low on 3rd May 2019) to the level of RMB6.7976 (Day’s high on 6th May 2019: GMT-4 3:49 AM) a dollar.
The strength in dollar prices coupled with high inventory in the United States and the potential end of trade talks on a negative note exerted pressure on crude oil prices.
Now, the market may further analyse the crude oil inventory in the U.S. and counteraction of China to gauge the direction of crude oil prices further.
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