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Oil prices fell on Wednesday after US President Donald Trump threatened to levy new tariffs on China, deepening a trade dispute that could depress global economic growth and reduce energy demand, report Agencies.
The specter of tariffs on a further $200 billion of Chinese goods sent commodities lower along with stock markets, as tension between the world’s biggest economies intensified.
Benchmark Brent crude LCOc1 was down $1.15 at $77.71 a barrel by 0735 GMT, having fallen as low as $77.60. US light crude CLc1 was down 40 cents at $73.71.
“Trade concerns have bitten today,” said Michael McCarthy, chief markets strategist at CMC Markets.
“If these tariffs are introduced there will be an impact on global growth and demand.”
The bearish mood was also fueled by news the United States would consider requests for waivers from sanctions due to snap back into place on Iranian crude exports.
Washington will consider requests from some countries to be exempted from sanctions it will put into effect in November to prevent Iran from exporting oil, US Secretary of State Mike Pompeo said.
Washington had previously said countries must halt all imports of Iranian oil from Nov. 4 or face US financial measures, with no exemptions.
The United States pulled out of a multinational deal in May to lift sanctions against Iran in return for curbs to Tehran’s nuclear program.
The prospect of sanctions on oil exports from Iran, the world’s fifth-biggest oil producer, has helped push up oil prices in recent weeks with both crude contracts trading near 3-1/2-year highs.
Supply to the US market has also been squeezed by the loss of some Canadian oil production.
US crude inventories fell last week by 6.8 million barrels, according to the American Petroleum Institute, an industry group.
Analysts polled by Reuters forecast on average that crude stocks fell by 4.5 million barrels, ahead of government data at 10:30 a.m. EDT (1430 GMT) on Wednesday.
US crude oil production is expected to average more than 12 million barrels per day late next year for the first time, the US Energy Information Administration said on Tuesday.