Investing.com - Oil prices traded sharply lower on Friday, after China announced it would impose import tariffs averaging 10% on $75 billion of U.S. goods, including crude and autos.
The move is a response to the U.S. decision to tariff all remaining Chinese imports by the end of the year. While expected, it further stokes fears about how far each side on the U.S.-China trade dispute is prepared to go in the short term to achieve its longer-term aims. China imported some 180,000 barrels a day of U.S. crude in July, according to UBS analyst Giovanni Staunovo. Bloomberg reported that the tariff on U.S. crude imports will be subjected to an extra 5% from next month.
The news gave a jolt to a market that had been content to wait for a speech from Federal Reserve Chairman Jerome Powell at the Jackson Hole Economic Symposium.
New York-traded West Texas Intermediate crude futures fell over 3% to $53.61 a barrel by 8:30 AM ET (12:30 GMT), while Brent crude futures, the benchmark for oil prices outside the U.S., fell 2.5%, to $58.44.
China's retaliation appeared timed for maximum effect, coming ahead of Powell's speech at 10:00 AM ET (14:00 GMT). Powell is expected to provide clues on whether the U.S. central bank will cut interest rates for a second time this year to boost the world's largest economy.
“Oil longs are counting on Powell to sprinkle some magic dust on crude,” Investing.com senior commodity analyst Barani Krishnan said in a note. “Bears, meanwhile, are counting on ramping U.S. crude production to continue offsetting supply outages or sudden spikes in demand.”
The tariff battle between the world’s two largest consumers of oil has been blamed with contributing a weakening global economy.
Krishnan said oil has been “experiencing some of their greatest volatility ever as the U.S.-China trade spat yanked crude around like a yo-yo”.
He said that, with the U.S. summer driving season nearing its end on the Sept. 2 Labor Day holiday, longs in the market are clinging to any support they can find.
“But range-bound trades may be their best hope if the Fed doesn't resort to cut rates like they expect, or the U.S.-China trade spat continues to be a drag on the global economy,” Krishan said.
Later on Friday, market focus will shift to Baker Hughes’ weekly rig count data at 1:00 PM ET (17:00 GMT).
In other energy trading, gasoline futures lost 0.5% to $1.6600 a gallon by 7:45 AM ET (11:45 GMT), while heating oil declined 0.6% to $1.8307 a gallon.
Lastly, natural gas futures traded down 0.2% to $2.154 per million British thermal unit.
-- Reuters contributed to this report.