Oil sets new seven-month low on trade tensions
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[August 07, 2019] By
LONDON (Reuters) - Oil prices fell further
on Wednesday, extending recent heavy losses as deepening U.S.-China
trade tensions weighed on the outlook for the global economy and energy
Brent crude futures <LCOc1> were down 40 cents or nearly 0.7% at $58.54
a barrel by 1025 GMT, setting a fresh seven-month low. Prices have lost
more than 20% since hitting their 2019 peak in April.
U.S. West Texas Intermediate (WTI) crude futures <CLc1> were down 17
cents, or 0.3%, at $53.46.
Brent has plunged more than 9% over the past week after U.S. President
Donald Trump said he would slap a 10% tariff on a further $300 billion
in Chinese imports from Sept. 1, sending global equity markets into a
(Graphic: Brent Crude today - https://tmsnrt.rs/2YsQs7P)
"The market continues to grow more uncertain about the demand outlook
given the deterioration of trade talks between China and the U.S.," ING
analysts said in a note.
The bank lowered its 2019 price outlook, mostly because of demand
concerns, forecasting that global oil supplies will exceed consumption
in the first half of next year.
Trump on Tuesday dismissed fears that the trade row with China could be
drawn out further. His comments failed to prevent shares in Asia from
falling for an eighth straight session on Wednesday. London's FTSE 100
"We believe that the oil market is now in a phase of exaggeration.
Demand is not sufficiently weak to justify the current price
performance. Assuming there is no recession, oil demand should continue
to see robust growth," Commerzbank said in a note.
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An oil pump is seen at sunset outside Scheibenhard, near Strasbourg,
France, October 6, 2017. REUTERS/Christian Hartmann/File Photo
Tensions in the Middle East remain high after Iran seized a number of tankers in
recent weeks in the Strait of Hormuz, a major chokepoint for oil shipments.
Saudi Energy Minister Khalid al-Falih and U.S. Energy Secretary Rick Perry on
Tuesday expressed mutual concern over threats targeting freedom of maritime
traffic in the Gulf.
"There are concerns that an event could occur at any moment ... the risk might
be shifting to the upside in the near term for oil contracts," said Michael
McCarthy, chief market strategist at CMC Markets.
Elsewhere, data indicating a larger-than-expected drop in U.S. crude stocks
offered some support to oil prices after several weeks of large draws on
Official data from the government's Energy Information Administration (EIA) is
due on Wednesday.
The EIA on Tuesday lowered its domestic oil growth forecasts for the year after
Hurricane Barry disrupted Gulf of Mexico output in July. Production is set to
rise by 1.28 million barrels per day to 12.27 million bpd this year.
(Additional reporting by Jane Chung; Editing by David Goodman and Dale Hudson)
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