Oil prices declined on Wednesday, losing gains in the previous day, as the risk of a trade war grew once more, after the resignation of President Donald Trump’s top economic advisor.
International benchmark Brent crude futures for May delivery fell by 1.3 percent to $64.92 per barrel, while US West Texas Intermediate (WTI) futures for April contract slipped by 1.1 percent to $61.88.
White House chief economic advisor and free-trade advocate Gary Cohn announced on Tuesday he was resigning from Trump’s administration, leaving the S&P 500 with more than a 1 percent drop earlier in the day. The decline was then followed by the descent of crude oil prices.
S&P 500 futures is currently down by 1 percent to $2,696.75.
Head of trading in Asia-Pacific at a futures brokerage Stephen Innes said the overhang from the Cohn resignation could place oil prices at a negative territory during today’s session.
Traders stated that rising US crude oil production and growing supplies were weighing down prices as well.
Data from the American Petroleum Institute (API) showed that crude inventories raised 5.661 million barrels in the week to 426.880 million barrels.
Supplies remain ample despite the Organization of the Petroleum Exporting Countries’ (OPEC) and Russia’s efforts to cut output to bolster prices.
Official data by the US Energy Information Administration (EIA) is due later this day.
Cohn’s Departure Fuels Trade War Fears
Gary Cohn, who would exit the White House in a few weeks, decided to resign after losing an internal struggle over Trump’s plan of implementing steep tariffs on steel and aluminum imports.
The departure of former Goldman Sachs Group Inc.’s president and Trump’s head of National Economic Council suggested Washington intended to continue with protectionist measures, including the 10 and 25 percent import tariffs, which could trigger an international trade war.
A trade war could leave economic growth inactive, and by extension, reduce oil consumption. If imposed, the tariffs could result to retaliatory actions from the European Union (EU), China, and Canada.
During a meeting with steel and aluminum executives on Thursday, where Trump announced the plan, Cohn clashed with the President’s protectionist advisors and has opposed the move, noting price increases for steel and aluminum products.
Trump stated on Tuesday that the tariffs were negotiable and he would not back down despite growing concerns among Republicans.
The President said the US has been taken advantage of by other countries for many decades, and they have a trade deficit of $800 billion per year, which is not going to happen with him.
Market spectators saw Cohn’s resignation as a bad sign for White House’s economic policy. He helped pass the $1.5 trillion tax reform law last year, which is Trump’s only major legislative victory so far.
Cohn’s departure is the latest blow to the administration, which has been through many high-profiled resignations since the election. Trump’s communications director Hope Hicks also quit last week.
Cohn’s exit now leaves Trump primarily with protectionist advisers, who support tough trade measures, such as the tariffs that the President pushed on, but Cohn argued against in the White House.
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