SINGAPORE (Reuters) – On Friday, Oil markets tense and went down lower ahead, of the raft of import tariffs set to be imposed later in the day by the world’s two biggest economies, the United States and China.

U.S. President Trump said, on Thursday ‘the United States may ultimately impose tariffs on more than a half-trillion dollars’ worth of Chinese goods, in what may become a full-blown trade war’. The United States has announced that the introduction of tariffs on Chinese goods is planned to be raised at 12:01 a.m. China has said that it would retaliate as soon as possible with its own tariffs.

“Things will get worse before they get better on trade… between the U.S. and China,” said Greg McKenna, chief market strategist at futures brokerage AxiTrader.

Beijing has also said that it will try to include around 25% tariff on U.S. crude oil imports but has not specified a date to include that duty. “Iran’s exports are some 2.7 million bpd, including condensate,” it noted.

Energy consultancy FGE this week issued a stark warning of looming supply shortages due to U.S. sanctions against Iran and also because of disruptions elsewhere.

A Chinese import tariff would make U.S. oil uncompetitive in China, forcing its refiners to seek alternative supplies elsewhere. International Brent crude oil futures were at $77.18 per barrel at 0043 GMT, down 21 cents, or 0.3 percent, from their last close. That would happen in a global oil market that has steadily tightened this year.

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FGE said, “the U.S. government may grant some waivers to allies that are particularly reliant on Iranian supplies and that some Iranian oil would also be smuggled into global markets. It estimated that once U.S. sanctions are fully implemented, some 1.7 to 2 million bpd of crude and condensate would be taken out of the market”.

“At the same time, Venezuela can do nothing to stop its own production decline and will lose another 400,000 bpd by year-end with production going to below 1 million bpd,” FGE said.

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