In an escalating spat over the United States’ trade deficit with most of its major trading partners, including China, U.S. President Donald Trump said last week he was pushing ahead with hefty tariffs on $50 billion of Chinese imports, starting on July 6.
China said Friday it would retaliate by slapping duties on several American commodities, including oil, Reuters reported.
Investors expect the spat to come at the expense of U.S. oil firms, pulling down the share prices of ExxonMobil and Chevron by 1 to 2 percent since Friday, while U.S. crude oil prices fell by around 5 percent.
The trade war between the United States and China comes at a pivotal time for oil markets.
“The Chinese may just replace some of the American oil with Iranian crude,” said John Driscoll, director of consultancy JTD Energy Services.
“China isn’t intimidated by the threat of U.S. sanctions. They haven’t been in the past. So in this diplomatic spat they might just replace U.S. crude with Iranian oil. That would obviously infuriate Trump,” he said.