uploads/2019/06/architecture-clouds-drilling-rig-87236.jpg

Oil Prices Fell Due Global Growth Concerns, Trade War

By

Updated

Oil prices fell

Oil prices fell on June 3, which extended last week’s downward momentum due to an escalation in the trade war. President Trump threatened to impose new tariffs on Mexican imports.

The escalating trade war could cause global growth to slow down. Weaker global trade would likely be a major headwind for crude oil demand. The WTI and Brent oil indexes were trading nearly 0.8% and 1.2% lower early on June 3. Currently, Brent is trading slightly above $61 per barrel, while WTI is trading near $53.

Rising trade tensions are impacting the global financial market. Stock markets around the world have lost significant value in May. The NASDAQ, the Dow Jones, and the S&P 500 lost 8%, 6.7%, and 6.6%, respectively, in market capitalization.

Large US oil companies including Chevron (CVX), ConocoPhillips (COP), ExxonMobil (XOM), and EOG Resources (EOG) fell 5.2%, 6.6%, 11.8%, and 14.8%, respectively, in May. The iShares U.S. Energy ETF (IYE), which invests in US energy companies listed in the Dow Jones, fell 11.4% in the last month.

Article continues below advertisement

US trade disputes

President Trump has been trying to reduce the US trade deficit with China, which reached ~$378 billion in 2018. He’s also pressuring China to make specific structural trade changes between the two countries.

President Trump wants China to stop intellectual property theft and restrain itself from giving special subsidies to its state-owned companies. He wants China to stop pressuring US companies to share technology in order to do business in the country.

For Mexico, President Trump is using tariffs to pressure the country to stop the illegal flow of immigrants entering the US.

Advertisement

More From Market Realist