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#MoneyBeat U.S.-China War of Words Escalates—Energy Journal

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A daily digest of The Wall Street Journal’s coverage of energy companies, commodity markets and the forces that shape them.

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U.S. TO CONSIDER TARIFFS ON ADDITIONAL $100 BILLION OF CHINESE GOODS

In a situation some investors are likening to  a tennis match, President Donald Trump volleyed back against Beijing on Thursday by threatening additional tariffs on $100 billion of imports from China.

The move would triple the amount of Chinese goods facing levies when entering the U.S., up from the tariffs on $50 billion in imports from China that the president announced last week, writes the WSJ’s Bob Davis.

After the U.S. threatened tariffs on Tuesday, China quickly came up with its own $50 billion hit list of U.S. exports to China, including aircraft and soybeans. That retaliation has led to outcries from agricultural interests and lawmakers for Washington to back off its hard-line stance to China.

Beijing has also hinted that it may come after U.S. oil exports as the country put U.S. petrochemicals and liquefied propane on its list of goods to target. U.S. oil net exports to China reached about 435,000 barrels a day last year, up from about 180,000 barrels a day in 2016, Bloomberg reports.

Markets are seesawing from the competing announcements from the world’s two largest economies.

The Stoxx Europe 600 was down 0.5% in Friday morning trading, following Asian markets broadly lower, while S&P 500 and Dow Jones Industrial Average futures dropped 0.7% and 0.9% respectively.

“The Street realizes this isn’t in effect and this is more ‘Art of the Deal’ from Trump,” said Gavin Parry, chief executive at Parry Global Group

OIL SLIPS AMID U.S.-CHINA TRADE TENSIONS

Meanwhile, oil prices eased further on Friday after an escalation of trade tensions between the U.S. and China pressured markets lower. Brent crude, the global oil benchmark, fell 0.4% to $68.09 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading down 0.4% at $63.30 a barrel.

DESPITE NEW TARIFFS, ALUMINUM IS ACTUALLY CHEAPER

U.S. aluminum prices are falling despite a tariff aimed at boosting domestic production of the metal, reports the WSJ’s Bob Tita.
That’s good news for manufacturers of products such as beer cans and car hoods, who are paying 4% less for aluminum than they were before the Trump administration announced the tariff on March 1.

The measure also caused some energy executives to voice concern that the barriers to trade on steel could hurt the oil industry due to the coming need for the metal to build new pipelines and other infrastructure. Temporary exemptions for many of the top aluminum-making countries including Canada, Argentina and Brazil have lessened the squeeze the tariff could put on aluminum.

RUSSIA SAYS OIL ALLIANCE WITH OPEC COULD CONTINUE PAST THE EXPIRY

Russia’s Energy Minister Alexander Novak said the deal with the Organization of the Petroleum Exporting Countries to curb global supply could become indefinite, Reuters reports.

Mr. Novak also left the door open for other big producers to join the oil alliance, although he did not cite any specific countries. U.S. oil production is projected to reach 11 million barrels per day in late 2018, rivaling the world’s top producers such as Saudi Arabia and Russia.

ACTIVIST INVESTORS TRY TO WAKE UP A SLUMBERING ENERGY SECTOR

A private-equity firm with a large stake in Houston explorer Carrizo Oil & Gas Inc. is calling on the company to sell assets or combine with a rival, the latest sign that activist investors are focusing more on the energy sector, writes the WSJ’s Ryan Dezember.

Kimmeridge Energy Management Co. has built up an 8.1% stake in Carrizo, according to a securities filing. The firm previously disclosed that it owned 4.9%.

The New York investment firm said in the filing that it wants Carrizo to sell its south Texas drilling fields and use the proceeds to pay down debt, buy back stock or invest more in its prolific fields in the state’s western desert.

The firm also said it wants Carrizo to explore the possibility of merging with rivals in West Texas.

FUTURECURVE

Today: Oil-services firm Baker Hughes Inc. releases its count of active drilling rigs, a bellwether for production in the U.S. oil industry.

April 18–19: IQPC hosts the Oil & Fuel Theft Summit in Geneva. Speakers include Mahmoud Al-Bayati, the director general for counter-terrorism for Iraq, William J. Waggoner, the chief executive of the Mexico Petroleum Company and Daniel Gianfalla, a member of the national maritime security advisory committee at the U.S. Department of Homeland Security.

 

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