Oil drops low for seven months due trade tensions affecting global demand

Oil prices slid down on Wednesday from recent big losses with Sino-US trade war that affects the outlook for the global demand and energy. 

Brent crude futures LCOc1 dropped to 11 cents or close to 2%, reaching 7-month low. Prices decrease more than 20% since reaching the last highest rate in April 2019. U.S. West Texas Intermediate (WTI) crude futures CLc1 came in flat at $53.63. 

A week ago, Brent rates dropped by 9% after US Donald Trump announcement of 10% additional tariff worth of $300 billion imports to China that somehow shakes the global equity market. An analyst from ING said that the market continues to be more unsure of the future given the worsening trade talks between China and the US. 

For this year, the bank has adjusted lower their outlook, which was influenced by demand. A forecast for global oil supply will exceed the demand in the first six months of the year. 

On another note, Trump’s recent comments actually prevented the decline of shares in Asia for an 8th time consecutively on Wednesday. 

Fitch solutions commented that “increased economic and trade uncertainties” influenced higher which in turn affects in a negative aspect the demand for physical oil and gas, as well as market sentiment. 

Moreover, geopolitical tension is still apparent in the Middle East after a reduction in tankers operating in Iran in the past few weeks, which impacts the oil shipments. A large decrease in US crude stocks will likely support the oil prices after a large drop in inventories. 

On Tuesday, the U.S. Energy Information Administration reduced oil growth forecasts for the year because of the bad weather, particularly in Hurricane Barry disrupted Gulf of Mexico output in July. The production is likely to increase by 1.28 million barrels per day (bpd) to 12.27 million bpd this year. The official data from the Energy Information Administration (EIA) is scheduled to be released on Wednesday.