NEW YORK: Oil slumped over three per cent on Friday, on track for its biggest monthly drop in six months, after US President Donald Trump stoked global trade tensions by threatening tariffs on Mexico, one of the largest US trade partners and major supplier of crude oil.
Brent crude futures fell $2.22, or 3.3pc, to $64.65 a barrel, by 1:12pm EDT (1712 GMT). US West Texas Intermediate (WTI) crude futures fell $1.86 to $54.73 a barrel, also a 3.3pc loss. Session lows for both contracts were the lowest since March 8.
Brent futures were on track for an 11pc slide in May and WTI for a 14pc drop, which would be their biggest monthly losses since November.
Trump vowed on Thursday to ratchet up tariffs unless Mexico stopped people from illegally crossing into the United States. The plan would impose a 5pc tariff on Mexican imports starting on June 10 and increase monthly, up to 25% on Oct. 1.
That could hit the lucrative cross-border energy trade.
“US refiners import roughly 680,000 barrels per day of Mexican crude. The 5pc tariff adds an extra $2m to the cost of their daily purchases,” PVM analysts said.
The United States also exports more fuels to Mexico than any other country, according to the US Energy Department, though so far Mexico has not said whether it would retaliate.
The threat compounds concerns about global economic growth, already at risk due to the U.S.-China trade war. That dispute has prompted worries about a recession..
Additional levies by Beijing on the majority of US imports on a $60 billion target list are due to take effect on Saturday. The tariffs are in response to Washington’s move earlier this month to slap further tariffs of up to 25pc on $200 billion of Chinese goods.
Published in Dawn, June 1st, 2019