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Oil May Hold The Secret To Ending The Trade War

Public Policy

On Wednesday, U.S. president Donald Trump crushed any hopes of a trade deal with China when he announced that China “broke the deal” and that, as a consequence, the U.S. will enforce even higher tariffs on some imports from China starting on Friday, May 10.

When the world’s first and second largest economies are quarrelling, it goes without saying that it puts the entire global market on edge. The international oil market is no exception. According to MarketWatch, “Those concerns have more than offset the price-supportive weekly decline in U.S. crude inventories reported Wednesday, though traders continue to keep watch on growing tensions between the U.S. and Iran, which raises the threat of disruptions to Middle East output.” Crude prices in the U.S. fell as well. The West Texas Intermediate crude benchmark “fell 42 cents, or 0.7 percent, to settle at $61.70 a barrel on the New York Mercantile Exchange”, putting prices “on track for a weekly loss of 0.4 percent”.

According to some experts, however, the dip in crude prices is just temporary. With global crude supply tightening thanks to sanctions on Iran and Venezuela, as well as a surprise decline in U.S. crude production, long-term price projections are looking up. In fact, West Texas Intermediate and Brent futures are up by 30 percent or more year to date, and MarketWatch reports that analysts at Barclays are extremely optimistic, already increasing their third-quarter forecasts by $4 each for both benchmarks.

Barclays analyst Amarpreet Singh went on to tell MarketWatch that, “lower output due to planned maintenance in the North Sea and the Caspian Sea over the next few weeks, coupled with dwindling Iranian exports due to tighter U.S. sanctions and what has so far been a very measured Saudi response just before the peak demand season, should support prices, in our view.”

Not all experts agree with this outlook, however. David Sheppard of Financial Times, who says that the threat of a trade war with China is a “more immediate risk” than any Mideast geopolitics and U.S. sanctions putting the squeeze on global oil supplies. In fact, Sheppard’s opinion piece argues that the United States’ trade dispute with China may actually be a roundabout way of achieving just what the Trump administration wants: lower oil prices.

“If US president Donald Trump wants the lower oil prices he has consistently demanded, then escalating a trade war with China is one unconventional method of meeting that short-term goal,” Sheppard writes. Where the U.S. was once the world’s biggest importer of crude oil, this distinction is now given to China. Together with the U.S., the first and second biggest economies in the world represent nearly a third of total global oil consumption. ”So the duo plays an outsized role in the oil market, before even starting to account for the spillover effects that a damaging trade war would have on the wider global economy.”

This is all to say that the far-reaching economic implications of a trade dispute between these two giants should not be underestimated. And although oil is not the major point of contention between the U.S. and China, its role should not be dismissed, nor should its precarious position thanks to the massive share of the oil market that the U.S. and China dominate. This means that energy could also play a key role in the ultimate resolution of the currently escalating trade war.

The United States has become one of the most important energy producers–and currently the fastest growing producer of “global energy supplies” — thanks to the shale oil boom in the West Texas Permian Basin. At the exact same time, China has become the fastest-growing energy consumer, especially when it comes to oil and liquefied natural gas–both of which the U.S. has in spades. “So while the dispute around tariffs goes far beyond trade balances,” argues Sheppard, “energy is one area where the two countries have a mutual interest in finding common ground.”

By Haley Zaremba for

28 Comments on "Oil May Hold The Secret To Ending The Trade War"

  1. Robert Inget on Sun, 12th May 2019 3:47 pm 

    DEBKAfile’s military and intelligence sources report that the UAE ministry’s statement conceals more than it reveals. It is obvious that someone in the Gulf region launched an attack on oil and gas shipping in the region. It can hardly be doubted that the aggressor in this case was Iran or one of its allies or proxies in Tehran’s first major reprisal for US sanctions on its oil exports. Iranian officials have declared that if Tehran can’t export its oil, neither will anyone else. Washington has so far made no response to this attack which has undoubtedly sparked intense deliberations.

  2. Robert Inget on Sun, 12th May 2019 4:03 pm 

    Geopolitical implications of blockading Iran
    may not fully come to light for decades.
    (if decades lay before us)

    Three things;
    It’s difficult to stop suicide bombers in ME ports or restricted passage ways.

    This will be the oil war to end all oil wars.

    Now that gauntlets have been thrown, neither
    side can back down.

  3. Davy on Sun, 12th May 2019 4:11 pm 

    Bob, Shias don’t do suicide attacks it is disagreeable with their form of Islam.

  4. Cloggie on Sun, 12th May 2019 4:27 pm 

    UAE reports four acts of sabotage against merchant ships in the Gulf, as reported by a news agency, aptly named “Wam”:

    The results were hardly substantial.

  5. Robert Inget on Sun, 12th May 2019 4:34 pm 

    Tanker Insurance in war zones

    Although we are still waiting on confirmation of hostile actions and specifics as to what occurred; should there have been concrete actions against maritime shipping …. the problem will not so much be tanker rates; but the ability to obtain Insurance.

    If the areas leading into the Strait of Hormuz effectively become a war zone (declared or de-facto), Insurers WILL NOT insure either ship or cargo.

    In the event insurance can be obtained, it would undoubtedly be much more expensive.

    It will be most enlightening to see at what price oil next trades.

  6. Robert Inget on Mon, 13th May 2019 9:15 am 

    China raises 60 Billion tariffs on US AG goods.

    Trump will just bump off Larry Kudlow*. Blame him
    for this disaster he has brought on financial markets.

    * Trump fires everyone who shows him to be the world class business stu-pedo. The list, someday, has to end at the TOP>
    Even the Best Conmen, and Trump is the BEST,
    get unmasked.

    Good Article on Houston Ship Channel

    Some here may recall my reporting an Iranian
    oil Tanker with a flooded engine room still floating
    off Syria w/1.1 Million B’s of Iranian crude. That tanker was towed, by Saudi tugs to a Saudi Port.

    Is there a connection? Several Saudi tankers
    now out of commission;

    Two, (maybe more, tankers)

    IMO this tit for tat won’t end here.

    Saudi Arabia expected to over-run neighbor Yemen in a matter of weeks. Four years later after
    bombing Yemen ‘back to the stone age’ killing hundreds of thousands, blame Iran for ‘supporting
    terrorism’ by helping barefoot tribesmen defeat the Kingdom from Hell.

    At the end of the day adventures in Yemen, Syria,
    Qatar, will bring down Saudi house.

  7. Robert Inget on Mon, 13th May 2019 10:05 am 

    And the band played on;

    EHA News

    Follow Follow @eha_news
    #BREAKING The Norwegian ship “André Victoria”, which was subjected to subversive acts in the #Fujairah against four ships near the territorial waters of the #UAE, received a powerful blow that almost led her to sank, according to a video footage obtained by Russia Today


    Limpet mines?
    I’m guessing Iranians (( whoever)) did’t leave a forwarding address, laying mines along crude oil export routes.

    This of course led oil traders to sell, sell, sell.
    In a few hours, if another steel double hulled ship
    hits a ? ‘mine’. It’ll be buy Buy BUY.
    Talk about disruptive technology; 19th century
    ship mines!

  8. Robert Inget on Mon, 13th May 2019 10:54 am 

    If ’embargoes’ are no longer considered ‘an act of war’ maybe, mining might be.

    No one (that we know of) has a gripe with Norway.
    That cargo vessel is a random victim.

    This Headline just appeared on a popular web page;

    Yet! ”

    These smartest men in the room can’t seem to make the connection between agriculture and oil.

    WITHOUT cheap oil, WORLD’s grocery bills go through the roof.

    On this board I’ll bet most here will make plans to plant that garden ASP>

    For those living in mom’s spare bedroom in the Senior Center, or an apartment deep into any city,
    time to stock up on Ramen.

    Another reminder, Canada is NOT in the US.
    Canada is the big country up there.

    Canada, like Australia, South America, Africa are not involved in Trump’s ‘war on trade’. China can and will be buying food stuffs from them.

    Where or where will US farmers (Trump Voters all)
    sell their produce?
    Much attention has been paid to soybeans.
    China used to import 70% of of the US bean crop.

    Will US farmers take a chance on selling this coming crop when LSAT YEARS crop remains unsold?

    Here’s proof;

    despite the ‘final oil war’ to ‘end all oil wars’ just getting underway we see this:

    If farmers won’t plant, day ain’t gonna use diesel. Just call the bank and tell em to pick up the keys.
    Just look at prices for wheat, cotton, beans, etc
    Prices like that Will Not Cover Fuel bills. Much less buy any new equipment or make payments on old. John Deere, CAT, stocks down below former lows.

    Obviously when Our Dear Leader decided to drop out of the Pacific Trade Agreement (because it was a Obama deal) the US is ‘going it alone’.
    MAGA Now we really begin understand what all that BS means.
    Trump called Canada “a security risk”
    from that left wing mag..

    Mexico? My typewriter ribbon needs changing.

  9. Duncan Idaho on Mon, 13th May 2019 11:14 am 

    The Fat Boy thinks he is dealing with a scammer from Queens.
    China is going to give him a lesson.
    Dow 30

  10. Robert Inget on Mon, 13th May 2019 11:48 am 

    Financial TV networks afraid to put blame where it belongs.

    Tariffs were never a good idea in 19th century.

    Tariffs in the time of instant communication, ‘Just-in-Time-Deliveries’, internet trading, ie: voting with dollars.

    Let’s not forget an administration ruled by a well armed minority, willing to fight the Federal Govt.,

    Finally, a cornered con-man in deep trouble with laws of the US. Expecting his packed supremes to keep him out of prison. Good luck with that.

    Our biggest fear today should be ‘wag the dog’
    mentality. IOW’s will Trump ‘respond’ to mining in the Gulf and elsewhere, regardless of who/what did the mining?

    Will we just wait for the next shoe to drop in Israel
    or Iran?

    Remember, Trump has zero intention of consulting
    Congress before plunging the nation into a long and painful oil war.

    “Trade Wars Are Easy to Win”
    Donald J. Trump

  11. Robert Inget on Mon, 13th May 2019 11:56 am 

    When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win. Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!

    — Donald J. Trump (@realDonaldTrump) March 2, 2018

  12. Robert Inget on Mon, 13th May 2019 12:12 pm 

    (New Yorker)

    Walmart.Satire from The Borowitz Report

    Trump Urges Americans to Boycott Chinese Goods and Just Buy Things at Walmart
    “If you go to a GREAT AMERICAN STORE like Walmart, you’ll find lots of cheap sportswear, shoes, and other items for you and your family to enjoy,” the President tweeted.
    By Andy Borowitz

  13. Duncan Idaho on Mon, 13th May 2019 12:30 pm 

    Dow 30

    The Fat Boy is going for more than 6 bankruptcies?
    It is a talent he has demonstrated—

  14. Cloggie on Mon, 13th May 2019 12:34 pm 

    A (((Borowitz))) from the (((New Yorker))).
    Making jokes about Trump.


    Note the word “satire” in the fine print.

  15. Davy on Mon, 13th May 2019 12:36 pm 

    Our board liberals love globalism and are happy about the rich getting richer through globalism. They ignore all those problems globalism inflicts on a nation because you know we are rich liberals. They also love that trump is doing this because they smell blood. Trump is showing he has balls something Obama would never did.

  16. Cloggie on Mon, 13th May 2019 12:43 pm 

    AfD changes position about Dexit (Deutschland leaving the EU).

    The old position was: If certain fundamental changes in the EU cannot be achieved, the AfD promotes leaving the EU, in order to establish a new European organisation, concentrating on economic cooperation (a sort of EEC, my words).

    The AfD has dropped that line and the position regarding the line above is “neutral”.

  17. Sissyfuss on Mon, 13th May 2019 12:48 pm 

    Davy, Obama was too decent to show his balls but that was his major fault. Not mean enough for the DC snakepit. Trump’s in hogheaven.

  18. Sissyfuss on Mon, 13th May 2019 12:53 pm 

    When are you going to Clexit on Brexit, Clogsnit? Your dialogue is sounding like cold fusions mantra. “Any day now, you watch.”

  19. Davy on Mon, 13th May 2019 1:02 pm 

    sis, Obama was smart because he knew if you show your balls you may get them cut off.

  20. Robert Inget on Mon, 13th May 2019 1:26 pm 

    Stunning replies.

  21. The Urgency of Now on Mon, 13th May 2019 1:36 pm 

    Since when does “fair and balanced and neutral” Davy speak for the board liberals?

  22. JuanP on Mon, 13th May 2019 1:46 pm 

    “The Urgency of Now on Mon, 13th May 2019 1:36 pm Since when does “fair and balanced and neutral” Davy speak for the board liberals?”

    juanpee, WTF is your new sock?? LOL, you are a dumb fuck.

  23. The Urgency of Now on Mon, 13th May 2019 1:47 pm 

    “Stunning replies”

    I think all this excitement has made somebody’s diapers wet.

  24. Davy on Mon, 13th May 2019 1:57 pm 

    Obama didn’t have balls but joe does.

    “Not Just Ukraine; Biden May Have A Serious China Problem As Schweizer Exposes Hunter’s $1bn Deal” zero hedge

    “Two years of investigations by journalist Peter Schweizer has revealed that Joe Biden may now have a serious China problem. And just like his Ukraine scandal, it involves actions which helped his son Hunter, who was making hand over fist in both countries. Schweizer, the author of Clinton Cash and now Secret Empires discovered that in 2013, then-Vice President Biden and his son Hunter flew together to China on Air Force Two – and two weeks later, Hunter’s firm inked a private equity deal for $1 billion with a subsidiary of the Chinese government’s Bank of China, which expanded to $1.5 billion, according to an article by Schweizer’s in the New York Post.”

  25. Davy on Mon, 13th May 2019 2:22 pm 

    I like talking about balls as much as I like talking about vaginas. It’s a sign of maturity with us hillbillies.

  26. Cloggie on Mon, 13th May 2019 2:24 pm 

    “When are you going to Clexit on Brexit, Clogsnit? Your dialogue is sounding like cold fusions mantra. “Any day now, you watch.””

    Hopefully October 31, 2019. No guaranties though. Not my fault, blame Westminster. Brexit is a geopolitical mega-event, much in contrast to your gay gaia fata morgana’s. Don’t take it personal, sisteract.

  27. JuanP on Mon, 13th May 2019 2:40 pm 

    Davy on Mon, 13th May 2019 2:22 pm
    I like talking about balls as much as I like talking about vaginas. It’s a sign of maturity with us hillbillies.

    more juanpee obsessions with sexual perversions

  28. Duncan Idaho on Mon, 13th May 2019 2:43 pm 

    Ten year old bull is starting to die, possibly.
    We shall see–

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