4-2-18 3:54 PM EDT | Email Article
By Stephanie Yang and Sarah McFarlane 

Oil prices slid to a two-week low on Monday, following stocks lower as heightened concerns over a trade war between the U.S. and China hit markets.

Light, sweet crude for May delivery fell $1.93, or 3%, to $63.01 a barrel on the New York Mercantile Exchange, its lowest close since March 19. Brent, the global benchmark, declined $1.70, or 2.5%, to $67.64 a barrel.

China imposed import tariffs on U.S. goods this week, in a response to tariffs on Chinese steel and aluminum announced by the Trump administration earlier this year. Traders and analysts fear that a full-blown trade war would crimp global growth and dampen the strong fuel demand that has helped push oil prices to multiyear highs.

Market participants are worried "it's the start of a trade war that could ultimately impact oil demand," said Andy Lipow, president of Lipow Oil Associates.

The Dow Jones Industrial Average fell more than 600 points on Monday, down 2.9% on trade concerns and a selloff in tech stocks, while the S&P 500 fell 2.7%. Equities and the U.S. dollar have exerted stronger influence on crude markets this year, as oil has become more closely linked to economic signals.

"The equity markets are definitely kicking oil in the pants here a little bit," said Tariq Zahir, managing member of Tyche Capital Advisors.

Oil prices have traded in a range this year as investors have parsed data for signs of supply and demand. Growing U.S. output has been largely counteracted by cuts by the Organization of the Petroleum Exporting Countries and other major oil producers, helping bring oil inventories closer to the five-year average in recent months.

"We're not putting a lot of credence in oil right now," Mr. Zahir said. "It's such a fluid situation. There's not a lot of clarity."

Analysts also said that an increase in OPEC production could undermine efforts to curb output, particularly as oil prices rise and the cartel determines how to end the agreement without shocking the market.

OPEC's second largest producer Iraq, has consistently pumped above the quota agreed with the cartel in the deal to cut production struck in 2016.

News reports that the Iraqi government has approved plans to increase the country's oil production capacity to 6.5 million barrels a day by 2022, from around 5 million barrels a day in 2019, were consistent with expectations that the country would continue to expand its output.

Consultancy JBC Energy estimates OPEC crude production rose 65,000 barrels a day in March to just under 32 million barrels a day, below its self-imposed ceiling of 32.5 million barrels a day.

"The market gets concerned that as oil prices tick on up, we'll see less compliance out of the OPEC and non-OPEC producers as they seek to take advantage of the higher price," Mr. Lipow said.

Gasoline futures fell 2.7% to $1.97661 a gallon and diesel futures lost 2% to $1.9802 a gallon.

Write to Stephanie Yang at stephanie.yang@wsj.com and Sarah McFarlane at sarah.mcfarlane@wsj.com

 

(END) Dow Jones Newswires

April 02, 2018 15:54 ET (19:54 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
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