By Adedapo Adesanya
Oil prices were trading down again Monday despite tensions in the Middle East. The latest market mover is not the tensions surrounding Iran, and it’s not outages in Libya and Venezuela. It’s not even oil production or inventory moves in the United States—it’s China.
Specifically, it’s the most recent move by China to allow its currency to devalue that has the markets reacting to the development.
The move follows a last-week announcement by President Donald Trump that the US plans to slap tariffs on the remaining $300 billion of goods that come in from China.
At the market yesterday, the Brent Crude Oil went down by 3.22 percent, losing almost $2 to trade at $59 per barrel.
West Texas Intermediate (WTI) Crude also followed as it declined by 1.44 percent or an equivalent of 80 Cents to trade at $55 per barrel.
And it’s not just oil prices that are feeling skittish. Stock markets around the world as well as the commodity market were in full-blown panic mode, with gold and government bonds taking full advantage.
The devaluation caught the attention President Donald Trump.
“China dropped the price of their currency to an almost a historic low. It’s called ‘currency manipulation.’ Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!” Trump tweeted on Monday in response.
While oil prices took a beating Monday, it is largely expected that China will not target US oil even if it retaliates with additional tariffs. China has scaled back its purchases of US crude, and is therefore unlikely to be directly affected by further tariff actions.
Dipo Olowookere