Brent's price slid again yesterday and is now down more than 20% from its recent April peak above $75, breaching an important mid-term support level in the process as demand side worries overcome supply side shocks to keep the energy commodity's price close to the lows.
As trade tensions ratchet up between the world's two biggest economies, speculation is emerging China may start avoiding American crude imports in anticipation that Beijing will impose tariffs, a move that could further weigh on oil prices.
"Crude oil prices remained under pressure as investors grappled with the impact of the trade conflict", ANZ bank said in a note.
Prices for the black gold fell early on worries about the trade war between Washington and Beijing, then extended losses after US government data showed a build of 2.4 million barrels in USA stockpiles instead of the 2.8 million draw analysts had expected.
Prices rebounded after tumbling almost 5% to their lowest since January on Wednesday after data showed an unexpected build in US crude stockpiles after almost two months of decline.
The West Texas Intermediate for September delivery rallied 1.45 USA dollars to settle at 52.54 dollars a barrel on the New York Mercantile Exchange, while Brent crude for October delivery rose 1.15 dollars to close at 57.38 dollars a barrel on the London ICE Futures Exchange. Weak demand in established markets is spurring Vitol to focus on emerging economies, he said.
Today's oil market is being driven by China. At 438.9 million barrels, USA crude oil inventories are about 2% above the five-year average for this time of year.
Amid lingering fears about a likely drop in energy demand due to the ongoing U.S.
An oil worker removes a thread cap from a piece of drill pipe on a drilling lease owned by Elevation Resources near Midland, Texas, U.S., February 12, 2019.
Financial markets across the globe were hammered over the past week after U.S. President Donald Trump on August 1 threatened to impose 10% tariffs on another $300 billion in goods from China starting next month.
Going forward and Looking at the EIA's global oil supply assumptions between July and December 2019, we notice that non-OPEC supply is expected to grow from 65.5M in July to 67M barrels in December, or 1.5M barrels growth.
"While some Saudi overtures of additional output restraint, a softening USA dollar and lift in global risk appetite are facilitating today's rally, we are not viewing this as the beginning of a sustainable advance by any measure".