Investing.com - Crude oil prices settled nearly 3% lower on Monday as escalating trade war fears prompted investors to flee riskier assets, offsetting recent data pointing to possible tightening in domestic output.
On the New York Mercantile Exchange crude futures for May delivery fell 2.9% to settle at $63.01 a barrel, while on London's Intercontinental Exchange, Brent lost 2.38% to trade at $67.69 a barrel.
Risk-off sentiment gripped markets on Monday amid thin volumes, as China imposed tariffs starting Monday on US food imports including pork, fruit, nuts and wine of up to 25% as a response to the Trump administration’s new tariffs on steel and aluminium imports.
Analysts have warned that a U.S.-China trade war would lower demand growth from emerging markets, which could slow rebalancing in oil markets.
“The retaliation from China is concerning for energy markets,” Michael Loewen, a commodities strategist at Scotiabank in Toronto, said. “If a trade war occurs between these countries and it affects demand growth from emerging markets, that could be a big problem.”
That offset recent positive data pointing to possible tightening in US production after energy services firm Baker Hughes reported Friday the number of oil rigs operating in the US fell by seven to 798.
Despite the fall in US rig counts, investors remained concerned that rising US production would continue to dent OPEC and its allies efforts to rid the market of excess crude supplies.
In November last year, OPEC and other producers, including Russia agreed to cut output by about 1.8 million barrels per day (bpd) to slash global inventories to the five year-average. But their efforts have been somewhat stifled by rising non-OPEC output, led by U.S.
U.S. production rose to record 10.43 million barrels a day, according to the Energy Information Administration.
Investor expectations for an uptick in crude prices, however, remained intact as data on Friday showed money managers increased their bullish bets on oil prices for the second-straight week.