(Bloomberg) -- Oil headed for a third weekly decline as worries that President Donald Trump’s tariffs on China will sap demand outweighed his first round of sanctions against Iran.
Brent crude edged higher on Friday but was still down more than 2% for the week. Trump slapped levies on all imports from China, with the world’s biggest oil buyer countering with its own measures due to come into force on Monday.
Meanwhile, private refiners in the Asian nation have slashed operating rates to lows last seen at the beginning of the pandemic, as US sanctions on Russia cut a key source of crude supply and demand appears to be faltering.
There are also pockets of softness in Europe. The crude grades that help underpin futures benchmarks are trading at the weakest level in several months as processing plants in the region shut down. So-called timespreads, which offer a gauge of market health, have also slumped this week.
The trade war — and the potential for it to spread — has stoked concerns that it will hamper growth in crude demand and lead to a glut later in the year. The new US administration’s fresh sanctions on Iran stopped short of the “maximum pressure” campaign that had been pledged, and they probably won’t significantly add to supply disruptions already in place.
“Oil prices remain under pressure but show signs of support around current levels,” said Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management. “The market fears that US tariffs on Chinese goods may further exacerbate the economic slowdown.”
Crude markets are having to re-adjust to the volatility introduced by Trump. Earlier this week, tariffs on Canada and Mexico — America’s two largest foreign sources of crude — were due to come into effect before being delayed. The President has also moved prices with comments that he wants to bring oil prices down.
Meanwhile, some technical indicators show this week’s drop may have gone too deep, with the nine-day relative strength index near the 30 level that suggests oil is oversold.
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