Oil prices fell more than 5% on Thursday, extending steep losses in the previous sessions, as the market braced for a prolonged U.S.-China trade war, digested disappointing manufacturing data and processed signs that Middle East tensions are moderating.
Brent crude futures, the international benchmark for oil prices, sank $3.12 cents, or 4.4%, or $67.87 per barrel around 10:20 a.m. ET (1420 GMT).
U.S. West Texas Intermediate crude futures tumbled $3.20, or 5.2% to $58.22 per barrel, after falling 2.5% the previous day. WTI dropped below $60 per barrel for the first time in nearly 2 months on Thursday.
“The $60 level is a critical support point,” said John Kilduff, founding partner at energy hedge fund Again Capital.
“After $60, really it’s right down around $58 or so. Theoretically, if this thing really becomes a washout, $52 is the downside objective,” he said, cautioning that the move would not happen overnight.
World shares made it four days in the red in the last five as concerns grew the China-U.S. trade conflict was fast turning into a technology cold war between the world’s two largest economies.
Commerzbank’s Carsten Fritsch pointed to “general market sentiment and a broad sell-off in commodities, whilst gold is up. Typical risk-off pattern.”
U.S. crude oil inventories rose last week, hitting their highest levels since July 2017, the government’s Energy Information Administration said on Wednesday.
Industry data had also shown a surge in U.S. crude stockpiles.
Commercial U.S. crude inventories rose by 4.7 million barrels in the week ended May 17, to 476.8 million barrels, the EIA data showed.
“The headlines figures are depressing enough and scratching the surface does not paint a rosier picture either,” PVM’s Tamas Varga said in a note.
“The prevalent optimism for a tighter global market and higher oil prices will now only be vindicated when U.S. oil inventories start drawing.”
Beyond weak refinery demand for feedstock crude oil, the increase also came on the back of planned sales of U.S. strategic petroleum reserves (SPR) into the commercial market.
U.S. crude oil production climbed by 100,000 barrels per day (bpd) to 12.2 million bpd, putting output near its record of 12.3 million bpd reached late last month.
Also bearish is the ongoing trade war between the United States and China, which is clouding economic growth, and with that, oil demand predictions as well.
The U.S. military said it sent two Navy ships through the Taiwan Strait on Wednesday, its latest transit through the sensitive waterway, angering China.
Countering these bearish factors are ongoing supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC).
French bank BNP Paribas said high inventories meant that OPEC would likely keep its voluntary supply cuts in place beyond their current end-June deadline.