Oil prices dropped by nearly 2% after China indicated that it may stop the sale of rare earths amid the trade impasse with the US.
Front-month Brent crude futures dropped by $1.56 to $68.55 a barrel, while US West Texas Intermediate (WTI) crude futures were down by $1.43 to trade at $57.71 per barrel, reported Reuters.
Chinese newspapers have warned that the country is considering a restriction on rare earths exports to the US. The move is seen as an attempt from the Chinese side to strike back at the US, which has imposed increased tariffs on imports from China.
London brokerage PVM was quoted by Reuters as saying: “China is the world’s biggest producer of these highly-prized raw materials and is poised to use them as leverage in its trade spat with Washington.”
Although this development had dampened the global oil market, it continued to receive support from supply-cuts and political tensions in the Middle-East. Members of Organization of the Petroleum Exporting Countries (OPEC) along with other key petroleum producers have restricted output since the beginning of 2019 to prop up prices.
The allied nations are scheduled to meet in June or July to discuss the future of the policy. Recently, Russian First Deputy Prime Minister Anton Siluanov indicated that it would consider an extension to the supply-cut deal.
According to the US Energy Information Administration (EIA) data, global oil demand is expected to average more than 100 million barrels per day (mbpd) in 2019.