Major oil-importing countries such as India may get a sweet surprise from the ongoing China-US trade war, as the international crude oil prices may slide as much as $30 per barrel if the dragon turns to Iran to quell its thirst for oil to retaliate against US tariffs, a recent report said. This, if happens, will cut India’s crude oil import bill dramatically, since the country depends on imports to meet over 80% of its energy requirements. Global crude oil prices can witness a freefall if China buys crude oil from Iran instead of the US in retaliation to the tariffs imposed on it, Bank of America Merrill Lynch said the research report, adding that this freefall can go up to $30 a barrel.
Latest data from China’s General Administration of Customs showed that China imported 796,000 metric tons of crude from the US in June. China’s crude oil imports stood at 9.7 million barrels per day in June. Asian oil buyers will be closely watching China’s July preliminary trade data to get an idea of prospective China’s partner, who can fulfill China’s oil appetite in the coming days, according to S&P Global Platts. If China switches to Iran oil, the move can cause unrest to the US foreign policy and can help to negate the effects of high tariffs imposed by President Donald Trump.
The latest round of US tariff can potentially cut the oil demand globally by 2.5-5 lakh barrels per day, which also adds to the fear of demand slowdown, that is challenging the fundamentals for crude, according to BofA Merrill Lynch report cited by CNBC. In the normal course, BofA estimates the crude oil prices to remain at around $60 per barrel for the next year.
The fall in crude oil prices in the international market continued on Wednesday, dragging the price of Brent crude to $58.82 per barrel. Previously, the Chinese Ministry of Commerce had threatened to take countermeasures after the US slapped 10 per cent tariff on Chinese goods worth $300 billion. The unrest thus caused pulled down the oil market, taking a hit of 8 per cent, the highest in four years. Brent crude was trading at around $65 per barrel on July 31, which has come down by 9.5 per cent in a week.
