The falls came despite a U.S. government report that American crude oil stockpiles fell by more than 12 million barrels last week and are about 4% lower than average for this time of year. Such a tariff would make American crude oil uncompetitive in China, and US oil sellers will have to find alternative buyers for their crude to replace the volumes they are now selling to their second-largest oil customer after Canada.
"Shale crude is not an alternative to Iranian crude", Sandy Fielden, director of research for commodities and energy at Morningstar, told Bloomberg. US crude CLc1 fell $3.73, or 5 percent, to $70.38 a barrel.
Oil prices plunged Wednesday afternoon, dropping on bearish news and posting their worst performance in over a year. -China trade dispute could hit global economic growth have also kept buyers on the back foot.
"Trade concerns have bitten today", said Michael McCarthy, chief markets strategist at CMC Markets. "If the forecast holds, that would make the USA the world's leading producer of crude".
Tokyo/London - Oil prices rose more than $1 a barrel on Tuesday due to growing supply outages, with Norway shutting one oil field as hundreds of workers began a strike and Libya saying its production more than halved in recent months.
Following recent port closures, Libyan production fell to 527K barrels per day from 1.28M barrels per day in February 2018.
"Libyan relief changes the conversation about spare capacity", said John Kilduff, a partner at Again Capital Management.
Last month, the United States said it wanted to reduce oil exports of fifth-biggest producer Iran to zero by November.
Still, there are already signs the threat of the renewed USA sanctions are discouraging some Asian countries from buying Iranian crude.
The American Petroleum Institute announced that crude inventories dropped by 6.8 million barrels in the week ending July 6 vs. Reuters' estimate for a decrease of 4.5 million barrels.
On the other hand, China is threatening to impose a 25-percent tariff on USA crude oil and oil products after the U.S.
"In spite of the extraordinary draw in crude oil inventories, the market is under pressure after refiners produced a record amount of gasoline this week and in conjunction with a greater than expected build in distillate inventories", said Andrew Lipow, president at Lipow Oil Associates in Houston.
During the session, CME Group said a technical issue impacted connectivity for some customers.
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