By Barani Krishnan
Investing.com - The oil pendulum swings from Iran to China.
After a remarkable rebound in the previous session triggered by saber-rattling over Iran, crude futures fell more than 1% on Tuesday on fear that President Donald Trump's fresh tariffs offensive against China could prompt Beijing to walk away from trade negotiations, scuttling the global economy.
West Texas Intermediate futures, the benchmark for U.S. crude, settled down 85 cents, or 1.4%, at $61.40 per barrel, the lowest settlement price since March 29.
London Brent futures, the global benchmark for oil, fell $1.51, or 2.1%, to $69.73 by 2:44 PM ET (18:44 GMT), under the key $70 support level.
Sentiment in oil as well as Wall Street took a hit after Trump announced plans at the weekend to hike tariffs already in place on $200 billion of Chinese imports and hit hundreds of billions of dollars' worth of other imports with new levies.
Tanker brokerage Eastport said in a note that "worsening trade friction between Washington and Beijing poses a downside risk to our forecasts" for petroleum products as fear grew that negotiations between the world’s two largest economies will break down.
The sheer number of countervailing factors in oil is making it increasingly hard for the average trader to cut through the noise and make the right calls.
Trump's threats toward China also caused an initial plunge of 2% in oil prices on Monday, before the market rebounded on geopolitical tensions related to Iran. U.S. National Security Adviser John Bolton said at the weekend Washington was deploying a carrier strike group and a bomber task force to the Middle East to meet with "unrelenting force" any Iran plan to attack the U.S.
Iran has threatened "reciprocal actions" against the U.S. ban on export of Tehran crude.
U.S. sanctions have already halved Iranian crude oil exports over the past year to less than 1 million barrels per day, and shipments to customers may drop to as low as 500,000 bpd in May as sanctions tighten, analysts say.
Jakob Olivier of Zug, Switzerland-based consultancy PetroMatrix listed the varying actions that were swinging the pendulum in oil now.
"After (yesterday's) close, (Treasury Secretary Steve) Mnuchin and (Trade Representative Robert) Lightizer went to the press to repeat that the U.S. will impose higher tariffs on Friday if China does not go the desired way," Jakob said.
"Tomorrow the headline risk will come from Iran and its decision on the JCPOA," Jakob said, referring to the Joint Comprehensive Plan of Action group that originally approved the 2015 nuclear deal on Iran that Trump withdrew from last year.
The JCPOA's remarks will be followed by the "Twitter reaction of Bolton/(Secretary of State Mike) Pompeo/Trump," Jakob said.
Tuesday's market was also weighed by worries that the U.S. government could announce another substantial build in crude stockpiles for last week in data due on Wednesday.
Analysts expect the U.S. Energy Information Administration to cite a crude increase of 744,000 barrels in its latest weekly dataset to add to the roughly 30 million barrels in builds from six previous weeks.
The American Petroleum Institute will issue at 4:30 PM a snapshot on what the EIA will likely to report on Wednesday for oil supply-demand in the week ended May 3.