Futures slipped to a seven-month low just above $58 a barrel in London, after losses on Tuesday brought crude’s decline from a late-April peak to more than 20%. The U.S. government’s Energy Information Administration lowered its estimates for growth in global oil demand in 2019 to 1 million barrels a day, while tensions between Washington and Beijing heightened after America designated China a currency manipulator on Monday.
Brent crude has fallen around 10% this month as the deteriorating relationship between the world’s two largest economies damped the global growth outlook, eclipsing the threat of supply disruptions in the Persian Gulf. The ratcheting up of trade tensions in the past week has spurred speculation that China will start avoiding buying American oil in anticipation that Beijing will impose tariffs.
“The bearish and deteriorating global macro situation seems to have the upper hand, pushing oil lower and lower,” said Bjarne Schieldrop, Oslo-based chief commodities analyst at SEB AB.
Brent for October settlement declined as much as 82 cents, or 1.4%, to $58.12 a barrel on the London-based ICE Futures Europe Exchange the lowest since Jan. 8. It was trading at $58.23 as of 8:37 a.m. local time. The global benchmark traded at a premium of $5.45 to WTI for the same month.
West Texas Intermediate oil for September delivery declined 83 cents to $52.80 a barrel on the New York Mercantile Exchange. The contract settled 1.9% lower on Tuesday.
Signs of economic danger are growing. The yield curve between 10-year and three-month U.S. government notes, closely watched as a gauge of potential weakness has inverted the most since 2007, while former U.S. Treasury Secretary Lawrence Summers said the risk of recession has increased substantially in the past two months.
The American Petroleum Institute reported that nationwide crude inventories fell by 3.4 million barrels last week, according to people familiar with the data.
If the decline is confirmed when the EIA publishes its own, more comprehensive data later on Wednesday, it will be the eighth consecutive weekly drop. Inventories shrank by 2.7 million barrels in the week through Aug. 2, according to the median estimate in a Bloomberg survey.
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