Oil prices fell 5% on Thursday, extending steep losses in the previous sessions, as the market braced for a prolonged U.S.-China trade war, digested disappointing manufacturing data and processed signs that Middle East tensions are moderating.
Brent crude futures, the international benchmark for oil prices, sank $3.12 cents, or 4.4%, or $67.87 per barrel around 10:20 a.m. ET (1420 GMT).
U.S. West Texas Intermediate crude futures tumbled $3.20, or 5.2% to $58.22 per barrel, after falling 2.5% the previous day. WTI dropped below $60 per barrel for the first time in nearly 2 months on Thursday.
“The $60 level is a critical support point,” said John Kilduff, founding partner at energy hedge fund Again Capital.
“After $60, really it’s right down around $58 or so. Theoretically, if this thing really becomes a washout, $52 is the downside objective,” he said, cautioning that the move would not happen overnight.
Crude futures fell with the stock market as the ongoing U.S.-China trade dispute entered a new phase. A wave of companies is suspending business with Huawei after the U.S. blacklisted the Chinese telecom giant.
Washington and Beijing are set to increase tariffs on hundreds of billion of dollars of one another’s goods, raising concerns about global economic slowdown and weaker demand for oil.
U.S. manufacturing activity grew at its slowest pace since September 2009 this month, according to IHS Markit.
Meanwhile, data released overnight showed Japanese manufacturing activity fell into contraction in May. Manufacturing activity for the European Union and Germany also came in below expectations.
“You’ve got the U.S.-China trade war just doing its damage across the board,” Kilduff said. “Crude was ready to take a hit on it all along except for the geopolitical tensions in the Middle East.”
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