Investing.com - Oil prices fell Wednesday morning in Asia, pulled down by concerns that a trade war is on the horizon.
Crude Oil WTI Futures for April delivery were trading at $62.11 a barrel in Asia at 10:45pm ET, down 0.78%. Brent crude futures for May delivery, traded in London, were down 0.82% at $65.25 per barrel.
The drop in prices followed a decline of more than 1 percent in S&P 500 Futures, triggered by the resignation of a key advocate for free trade in the U.S. Gary Cohn, economic adviser to U.S. President Donald Trump, said on Tuesday he was resigning, fueling growing concerns that Washington would go ahead with protectionist measures including the proposed import tariffs, which could risk a trade war.
A global trade war could bring economic growth to a standstill, and by extension, drag down oil consumption. Major powers including the European Union and China have warned that if implemented, the new tariffs could lead to retaliatory action.
Oil prices were also pulled down by weaker sharemarkets as well as soaring U.S. crude oil production and rising inventories recently.
Crude inventories increased by 5.661 million barrels in the week to 426.880 million barrels, according to recent data from the American Petroleum Institute.
Oil supplies remain ample despite efforts from the Organization of the Petroleum Exporting Countries (OPEC) and Russia to reduce output in order to support prices.
OPEC has been cutting back output by around 1.2 million barrels per day (bpd) since January 2017, with output falling to a 10-month low in February 2018. The pact will run through the end of this year.
However, the U.S. has simply taken the market share from OPEC producers by ramping up its shale oil production. Once the world’s top oil importer, the U.S. has increased its oil output to over 10 million bpd and is moving closer to self-sufficiency.
The U.S. has already risen past top exporter Saudi Arabia, and is set to overtake Russia as the world’s largest oil producer by 2019 at the latest.