Investing.com - Oil prices sank on Wednesday as heightened trade tensions between the U.S. and China exacerbated concerns of a global slowdown that could dent demand for crude.
Chinese media reported that Beijing is prepared to limit the export of rare earth elements to strike back at the U.S., a move that would escalate the conflict and potentially damage the global economy.
New York-traded West Texas Intermediate crude futures slid $1.73, or 2.9%, to $57.41 a barrel by 8:10 AM ET (12:10 GMT), while Brent crude futures, the benchmark for oil prices outside the U.S., sank $1.84, or 2.7%, to $66.83.
Concerns over demand have recently taken the spotlight, outweighing fears of a supply crunch that had been stoked by the collapse of Venezuelan and Iranian exports under a combination of U.S. pressure and economic mismanagement, as well as by lingering problems with exports of contaminated oil by Russia
Uncertainty over an extension of the output restraint deal between OPEC, Russia and others has also entered the picture. Reports have surfaced that Russia is requesting that a ministerial meeting to review the pact be pushed back to July from the last week of June. The lack of agreement on the date alone may imply a potential breakdown of the alliance.
Adding to bearish sentiment, U.S. President Donald Trump revealed a more conciliatory tone with respect to Iran sanctions this week. U.S. National Security Adviser John Bolton has also fallen into line, affirming that the White House is not planning a military offensive in response to Iran’s alleged attack on oil tankers outside the Straits of Hormuz.
“Trump’s U-turn on Iran policy spells big trouble for oil bulls,” Investing.com senior commodity analyst Barani Krishnan warned.
The White House is “trying to be prudent and responsible” in attempting to avoid a war with Iran, Bolton told reporters Wednesday ahead of a meeting with the United Arab Emirate’s Crown Prince Mohammed bin Zayed to discuss security in the region.
Still ahead, weekly data on U.S. crude inventories were delayed by a day this week due to Monday’s holiday. The American Petroleum Institute will release its figures late Wednesday, after five straight builds, while the Energy Information Administration’s official report is due Thursday amid expectations for a draw of 0.8 million barrels.
In other energy trading, gasoline futures fell 2.5% to $1.8875 a gallon by 8:12 AM ET (12:12 GMT), while heating oil slumped 2.0% to $1.9539 a gallon.
Lastly, natural gas futures traded up 1.9% at $2.633 per million British thermal unit.