WASHINGTON, D.C. (DTN) -- Nearest delivered New York Mercantile Exchange oil futures and Brent crude on the Intercontinental Exchange tumbled in early trading Monday, after White House announced it would raise tariffs to 25% on Chinese imports this week that point to a breakdown in months long trade negotiations.
Shortly after 9 a.m. ET, Nymex June West Texas Intermediate futures were down $0.75 near $61.20 per barrel (bbl), with ICE July Brent $0.50 lower at $70.35. Nymex June ULSD futures were 1 cent lower near $2.06 gallon, and the June RBOB contract slid 2 cents to $2.0065.
U.S. President Donald J. Trump threatened on Sunday to hike tariffs on all Chinese imports to the United States this week, reversing the previous stance that trade negotiations were going well. The President said in a Twitter post that the current 10% tariff on $200 billion worth of Chinese goods will rise to 25% on Friday, while also targeting a further $325 billion of China's products. A sudden escalation in rhetoric from the White House comes after U.S. Trade Representative Robert Lighthizer said China was pulling back from some previous commitments.
The Wall Street Journal reported earlier that China was considering cancelling this week's meetings in Washington altogether in light of Trump's comments. U.S. officials had not indicated yet on whether they expect talks to go ahead this week. According to several reports, The United States had been targeting May 10 to announce a deal that would be finalized and signed by Trump and Chinese President Xi Jinping later at an official summit.
U.S. equities tumbled more than 2% on Monday morning on the news, while China's main indexes plunged more than 5%.
Against the backdrop, U.S. economy showed incredible signs of resilience with the latest job report on Friday detailing unemployment in the United States at a nearly 50-year low. U.S. Bureau of Labor Statistics reported 263,000 new jobs were added in the United States last month, easing demand concerns in the world's largest economy.
On the supply side, analysts expects U.S. crude inventories increased again last week, continuing week-on-week builds in domestic crude supplies. Energy Information Administration said last week U.S. stocks surged to a 19-month high during the last week of April amid record 12.3 million barrels per day (bpd) production.
Baker Hughes reported on Friday the number of oil rigs deployed in the United States also increased by two last week after a 28-rig plunge in the previous two weeks that pressed the count to a 13-month low. Oil companies operating in the United States have removed 78 rigs from the field year-to-date, while down nine in the second quarter and 27 against year prior.
Liubov Georges can be reached at email@example.com
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