Oil prices slid about three per cent on Wednesday as a trade dispute between the United States and China escalated further and after Chinese import data showed a slowdown in energy demand.
Brent crude futures fell $US2.37 to settle at $US72.28 a barrel, a 3.17 per cent loss.
US West Texas Intermediate (WTI) crude futures fell $US2.23 to settle at $US66.94 a barrel, a 3.22 per cent loss. The session low of $US66.32 was the lowest since June 22.
China is slapping additional tariffs of 25 per cent on $US16 billion worth of US imports, from fuel and steel products to autos and medical equipment.
The escalating trade war has rattled global markets. Investors fear a potential slowdown of the world’s two largest economies would slash demand for commodities.
‘The US-China trade war is set to worsen, and its impact on oil prices will be gradual as the situation develops,’ said Abhishek Kumar, senior energy analyst at Interfax Energy in London. ‘Crude oil and refined products affected by additional duties will reduce their competitiveness in the Chinese market.’
China’s crude imports recovered slightly in July after two straight monthly declines, but remained low due to a drop-off in demand from smaller independent refineries.
Shipments into the world’s biggest importer of crude last month rose to 8.48 million barrels per day from 8.18 million bpd a year earlier and June’s 8.36 million bpd, customs data showed. However, July imports were still the third lowest so far this year.
Also weighing on prices, the US Energy Information Administration reported that crude inventories fell just 1.4 million barrels in the latest week, less than half the 3.3 million-barrel draw analysts had expected.
Gasoline stocks notched a surprise rise of 2.9 million barrels, not the 1.7 million-barrel drop analysts had predicted in a Reuters poll.
‘Overbearing product builds are weighing on the entire energy complex,’ said Anthony Headrick, energy market analyst at brokerage firm CHS Hedging LLC.
Prices drew some support from US sanctions against Iran, introduced Tuesday in a range of sectors. From November, Washington will target the petroleum sector in Iran, the No. 3 producer in the Organization of the Petroleum Exporting Countries.
An Iranian newspaper reported that Foreign Minister Mohammad Javad Zarif said a US plan to reduce Iran’s oil exports to zero will not succeed.