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Natural gas and soy prices plummet as China reacts

The oil price plunged to its lowest level since 2021 on Friday, and other commodities such as natural gas and soya beans also fell. This was due to China's retaliation against the aggressive tariffs imposed by U.S. president Donald Trump.

Beijing announced an additional 34% levy for all U.S. products, retaliating after Trump announced that a 10% minimum duty would be applied to most U.S. imported goods. The duties were significantly higher for dozens countries, including China.

Bjarne Shieldrop is chief commodities analyst for SEB. He said, "This is China's first explicit escalation, and they are not backing off, they have upped the game." He expects further retaliation by Trump.

As tensions increased, fears grew that tariffs would lead to a trade war worldwide. This could impact the economy and reduce demand for certain commodities. The U.S. levies excluded energy. However, the retaliatory action by China includes all U.S. products, including export restrictions on certain rare earths.

According to Kpler data and EIA, the U.S. exports a lot of energy to China.

Wall Street benchmarks were heavily sold, with the Dow Jones on course to reach a correction and the Nasdaq set to enter a downturn.

Brent futures dropped $5.29 or 7.5% to $64.85 per barrel, while U.S. West Texas intermediate crude futures declined $5.57 or 8.3% to $61.83 per barrel. The benchmarks for oil were set to the lowest close in the last four years, since the beginning of the pandemic.

Gas prices have also fallen in Europe and Asia. The European gas price plunged to its lowest level in more than six months. The Dutch front-month contract fell by 3.02 euros or 7.7%, at 36.45 Euros per Megawatt Hour (MWh), or $11.78/mmBtu. The Asian spot prices for liquefied gas (LNG), too, remained at the lowest levels in over six months.

SOYBEANS and GRAINS

The Chicago Board of Trade Soybean Futures fell by more than 2 percent on Friday, as China's tariffs against U.S. products are expected to stop trade between the two countries. China is the biggest buyer of U.S. soyabeans.

CBOT soybeans fell 2.3% to $9.88 per bushel by 1304 GMT, after falling to a three-month low price of $9.84.

Prices of grain also dropped. CBOT Wheat fell 1.9% to $5.26 per bushel, while Corn lost 1% at $4.52-3/4 per bushel.

Tariffs on Chinese grain and soybeans will prevent sales to China. "There will be no U.S. grain or soybean sales to China until the tariff issue is resolved," said one European trader.

The trade war that began during Trump's first presidency in 2018 has already put pressure on the demand for U.S. agriculture products. Beijing raised tariffs last month on U.S. goods worth $21 billion in response to Washington’s earlier round on Chinese products.

(source: Reuters)