Oil records its biggest monthly decline in 6 months due to the China – US trade war

Oil prices fell on Friday and settled on track for their biggest monthly drop in six months as US President Donald Trump’s comments escalated the trade tensions between the two countries.

Brent crude futures are headed for a 10% drop in May, and WTI is down 13%, the biggest monthly loss since last November.

Brent crude futures reached $65.72 last month, down $ 1.15 from the closing of the last session, according to the International Oil Price Index.

US crude oil futures were $55.85 a barrel, down 74 cents from the last session.

US President Donald Trump pledged on Thursday to impose tariffs on all goods from Mexico unless illegal immigration was halted, raising concerns about economic growth and oil appetite.

“The decision conceptually sends shivers down,” the company said in a note. “The mood is now definitely a risk, and this puts oil under pressure at the moment.”

Refineries import about 680,000 barrels per day of Mexican crude. The 5% tariff adds an additional $ 2 million to the cost of its daily purchases.

Mexico’s trade dispute adds to a trade war between the United States and China, which many analysts expect will lead to a recession.

China’s factory activity contracted more than expected in May, an official survey showed on Friday. Crude oil prices also came under pressure from a return of US oil production to a record 12.3 million bpd and a much lower than expected drop in US inventories.

The US Energy Information Administration (EIA) said crude stocks fell by about 300,000 barrels last week to 476.49 million barrels. That was far short of analysts’ forecasts of a 900,000-barrel drop in a Reuters poll, well below the 5.3-million-barrel drop seen by the API industry.

A Reuters survey found that an increase in production by Saudi Arabia, the largest oil exporter in May, was not enough to offset the drop in Iranian exports, which collapsed after the United States tightened its grip on Tehran. Iran’s special representative to Iran, Brian Hook, said on Thursday Washington would punish any country buying oil from Iran after the exemptions expire on May 2.

The Wall Street Journal reported earlier on Thursday that countries such as China and India, which issued exemptions in November to buy Iranian oil, could continue buying after May 2 until they reach a negotiable ceiling.

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