Oil headed for the biggest two-day drop since July as fears over a worsening trade war rattled global markets.
Futures dropped as much as 2.1 percent in New York, extending Wednesday’s 2.4 percent slide. As the U.S.-China trade tensions escalate, investors are shunning risk assets from equities to oil on fears over slowing growth. That comes as Hurricane Michael became the strongest storm to hit the U.S. mainland since 1992, threatening to slash fuel demand in the southeast, while country-wide crude stockpiles are expected to have increased a third week.
“The oil market can not shield itself from the rout in equity markets,” said Norbert Ruecker, head of macro and commodity research at Julius Baer Group Ltd. in Zurich.
Crude has eased after climbing to a four-year high earlier this month. The International Energy Agency has warned surging prices could hit consumption in emerging economies which are already reeling from depreciating currencies. Concerns are building just as U.S. crude inventories are expected to increase as summer demand wanes.
West Texas Intermediate for November delivery declined as much as $1.54 to $71.63 a barrel on the New York Mercantile Exchange, and was at $71.82 at 10:26 a.m. in London. Prices closed at the lowest level since Sept. 27 on Wednesday. Total volume traded was about 61 percent above the 100-day average.
Brent for December settlement was $1.63 lower at $81.46 a barrel on the London-based ICE Futures Europe exchange, after falling $1.91 on Wednesday. The global benchmark crude traded at a $9.76 premium to WTI for the same month.
The biggest stock slump since February rolled from the U.S. through Asia and Europe on Thursday, with benchmarks from China to London slumping. The Shanghai Composite dropped as much as 6.1 percent and the U.K.’s FTSE 100 slipped as much as 1.9 percent. The S&P 500 and the Dow Jones Industrial Average declined more than 3 percent Wednesday.
In the U.S., Hurricane Michael has curtailed 40 percent of crude output in the Gulf of Mexico. It may lower fuel demand in the U.S. southeastern markets by 1 million barrels a day, according to Mizuho Securities. Gasoline futures dropped as much as 2.5 percent and diesel slumped as much as 1.6 percent.
Other oil-market news U.S. crude stockpiles rose 9.75 million barrels last week, the industry-funded American Petroleum Institute was said to report. That would be the largest build since February 2017, if confirmed by Energy Information Administration data due Thursday. Inventories at the key storage hub at Cushing, Oklahoma, gained 2.25 million barrels last week. A natural gas pipeline rupture in British Columbia is forcing refineries in Washington to cut output, pushing gasoline prices higher in the Pacific Northwest. Chinese oil buyers are making a beeline for a bargain across the Pacific as Canadian oil is over 60 percent cheaper than WTI and Brent.