Oil Prices Drop On US-China Trade War, Saudi Production Boost

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US President Donald Trump tweeted this week on Wednesday that the Organization of Petroleum Exporting Countries (OPEC) is "driving [fuel] prices high" and asked them to "REDUCE PRICING NOW".

Oil prices fell on Thursday after US President Donald Trump sent a strident tweet demanding that OPEC cut prices for crude. S. defends many of their members for very little dollars.

"This must be a two way street", his latest statement read.

Similarly, the Organisation of Petroleum Exporting Countries (OPEC) report indicated that Saudi Arabia raised oil output by nearly 500,000 barrels per day last month. Rising gasoline prices could create a political headache for Trump before November mid-term congressional elections by offsetting Republican claims that his tax cuts and rollbacks of federal regulations have helped boost the U.S. economy.

The U.S. government plans to shut Iran's oil exports out of the market from November, demanding that all countries stop buying its oil.

Hossein Kazempour, Iran's OPEC Governor, thinks prices are rising because of Trump's tweets. "Pls stop it, otherwise it will go even higher!" the Iranian official added. The Saudis said on Tuesday that they would increase production to offset what's not coming into the market from Venezuela and Iran (whose oil markets have been hobbled by sanctions), but did not say by how much.

Yesterday, the deputy commander of the Sarollah Revolutionary Guards in Tehran warned that any attempt to undermine Iran's oil exports will lead to the closing of the Strait of Hormuz-a narrow waterway vital to oil distribution in the Persian Gulf region.

Brent crude, the global benchmark, was down 19 cents at $77.20 a barrel while US crude slipped 2 cents to $72.92.

Also on Thursday, data showed United States crude stockpiles rose unexpectedly last week by 1.2 million barrels.

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West Texas Intermediate crude for August delivery traded at $73.86 a barrel on the New York Mercantile Exchange, down 28 cents, at 3:01 pm in Singapore.

OPEC and its allies agreed earlier this month to a modest increase in output to dampen the oil price rally, which hit a 3-1/2 year high.

Michael Armstrong, regional director for the Middle East, Africa and south Asia (Measa), FCA and Institute of Chartered Accountants in England and Wales (ICAEW), said due to surge in oil price, the UAE economy will bounce back in 2018 with growth accelerate from 1.5 per cent last year to 2.6 per cent this year. This is a more harsh response than many analysts expected and, if it was to happen, could leave the global market undersupplied.

China says it will retaliate, and U.S. President Trump said on Thursday he may ultimately impose tariffs on more than a half-trillion dollars worth of Chinese goods.

He added that his refinery had canceled US crude imports and would switch to Middle East or West African supplies instead.

Traders said supply disruptions could be short-lived as Opec and allied producers ramp up output.

USA crude futures dropped 90 cents, or 1.2 percent, to $73.22 per barrel as of 11:18 a.m. EST (1518 GMT).

Trading activity is expected to be limited on Wednesday by the U.S. Independence Day holiday.