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Geopolitics

Crude Oil as the new weapon in the U.S and China trade war?

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As the U.S.-China trade war continues to escalate, Beijing and its energy giants appear to be bracing for a worst-case scenario where the spat would drag on for years and possibly result in Chinese foreign oil supply stifled.

The idea that the world’s top oil importer could see some of its overseas crude supply blocked has always been an unthinkable notion, but now some analysts and Chinese industry executives suggest that China should prepare for the very worst of the worst, such as its oil supply impacted by a lengthy trade dispute.

Chinese oil industry executives said this past week that China’s oil industry must have a contingency plan in case the trade war takes another turn for the worse. https://finance.yahoo.com

Expectations for any sort of trade deal in the near-term are quickly dissipating, leaving investors to map out what else could get caught in the escalation between the U.S. and China. Here’s a new one to add to the list: Oil.

Higher oil prices though would be bad for China (as well as other emerging markets that import oil like India), further deteriorating its current account balance. “Could the China hawks in the U.S. administration also try to change Chinese behavior through a higher oil price? https://www.barrons.com

just today Saudi Arabia raises July crude oil prices to Asia. Saudi Aramco has raised its July price for its Arab Light grade for Asian customers by $0.60 a barrel versus June to a premium of $2.70 per barrel to the Oman/Dubai average, the state oil company said on Sunday. –kitco.com

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Geopolitics

U.S Dollar Wars – Rosneft Oil Asks Traders to Pay in Euros for Crude

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Russia’s oil giant Rosneft tendered a sell of a cargo of crude, asking would-be buyers to pay in euros for the consignment, just weeks after doing the same for refined fuels. – https://www.bloomberg.com

Russian President: We see attempts of using the dollar as the political error. I believe this is one more major mistake, because the dollar enjoyed a lot of confidence globally. This was actually the only universal global currency. The United States started using dollar settlements as a tool in the political struggle for some purpose, imposing restrictions on dollar use and cutting the branch they are sitting on but they will fall with a crash soon,” Putin said.

Crude oil is quoted in U.S. dollars (USD). So, each uptick and downtick in the dollar or in the price of the commodity generates an immediate realignment between the greenback and numerous forex crosses.

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Half of Saudi Arabia’s oil industry got taken offline by 1 drone

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Yemen’s Houthi group said it attacked two plants at the heart of Saudi Arabia’s oil industry on Saturday, Taking out more than half the Dictatorships output, in a move expected to send oil prices soaring and increase tensions in the Middle East.

After drone attacks shut oil output in Saudi Arabia, the world’s largest crude exporter, a Department of Energy spokeswoman said the Trump administration is prepared to tap U.S. emergency oil reserves if necessary.

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