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Edited by: Ahmed Shawky
Direct: A growing trade war between the United States and China could provoke a double shock on the fragile oil market.
Indeed, mutual tariffs have resulted in a decline in crude oil prices due to fears of a global economic downturn, or even a recession in the United States, that could affect the already low demand for crude oil.
But there could also be a supply shock, Merrill Lynch, of the Bank of America, warned that China could react to US tariffs by buying huge amounts of Iranian oil, in defiance of the sanctions imposed by Washington on the states OPEC members. The.
So, if China ignores US sanctions on Tehran, Iranian oil could overwhelm the market.
Bank of America wrote in a note to its customers that China's purchase of Iranian oil would cause the collapse of the Brent price of 60 to 40 dollars a barrel.
US oil prices have fallen nearly 7% since the end of last month, a day before President Donald Trump pledged to impose 10% tariffs on US imports. $ 300 billion from China on September 1st. Led to a loss of 8% for Brent.
The US bank said the latest round of US tariffs on China could eliminate between 250 and 500,000 barrels per day of global oil demand.
The appetite of investors for the purchase of oil has already been low due to the economic slowdown. China's promise to respond to US tariffs throws additional uncertainty on the outlook for the global economy.
China began to react effectively yesterday by letting its national currencies reach their lowest level in ten years against the dollar and sought to increase the targeting of US farmers by announcing that Chinese companies had stopped buying agricultural products in Washington.
Iranian oil exports collapse
China could retaliate indirectly by seeking to undermine Trump's foreign policy.
The sanctions imposed by Trump on Iran are aimed at preventing Tehran from obtaining funds and creating economic difficulties that force the country to abandon its nuclear ambitions.
The sanctions have succeeded in frightening most Iranian oil buyers and weighing on the country's economy. The unemployment rate is expected to increase by 16% in 2020, according to the International Monetary Fund.
Iran's oil exports fell to 530,000 b / d in June, according to the International Energy Agency (IEA), compared with 2.6 million b / d in May 2018.
In other words, the sanctions imposed by the United States have eliminated about 2 million barrels of daily oil supply, thus helping to limit the impact of the increase in crude oil production of the United States. -United.
Bank of America thinks that Iranian oil exports will almost disappear by 2020.
China may seek to avoid "open provocation"
However, it is not as if China has completely stopped buying oil from Iran.
China imported an average of 400,000 bpd of Iran in the first half of 2019, according to Matt Smith, director of commodity research at Sleeper Data.
"Iran could be a possible way for China to take revenge on the United States, but they do it one way or another," Smith said.
Mr Smith said it was difficult to determine the number of barrels of oil purchased in July, as Iran publicly attempted to conceal the holdings of these flows, noting that Iran had closed the ship tracking signals and proceeded to ship-to-ship transfers.
Some believe that China will not be willing to intensify the trade war dramatically by undermining Trump's campaign against Iran.
For his part, "Michael Herson", CEO of the group "Eurasia": "China will not gradually eliminate its imports from Iran, but it will not stop the work that will constitute a provocation open for the Trump administration ".
Herson said China would have "a lot to lose" if the United States reacted to any major Chinese purchase of Iranian oil by punishing a Chinese company or a major financial institution.
Hirson explained that it would offset the advantage of importing more Iranian oil and would show Beijing's lack of respect for Washington.
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