Oil prices crashed on Monday, pushing U.S. crude to its lowest in more than two weeks, as rising tensions in the U.S.-China war knocked confidence in the global economy.
Brent crude was down 89 cents, or 1.5 per cent at $58.45 a barrel having earlier touched $58.24, the lowest since August 15, while U.S. oil fell $1, or 1.8 per cent to $53.17 a barrel, earlier falling to $52.96, the lowest since August 9.
Oil prices are being hit “in large part because of worries about a severe global economic slowdown and potentially even a U.S. recession,” said Stephen Innes, managing partner at Valour Markets.
Concerns about an economic slowdown are being fanned by the intensifying trade war between the United States and China.
China’s commerce ministry said late last week it would impose additional tariffs of 5 per cent or 10 per cent on a total of 5,078 products originating from the United States, including crude oil, agricultural products such as soybeans, and small aircraft.
In retaliation, President Donald Trump said he was ordering U.S. companies to look at ways to close operations in China and make products in the United States.
ThenU.S. Federal Reserve chair Jerome Powell told an annual economic symposium in Jackson Hole, Wyoming that the U.S. economy is in a “favourable place” and the Federal Reserve will “act as appropriate” to keep the current economic expansion on track.”
The remarks gave few clues about whether the central bank will cut interest rates at its next meeting.
But exacerbating concern over the possibility of recession, U.S. manufacturing industries registered their first month of contraction in almost a decade.
The U.S. energy firms this week cut the most oil rigs in about four months, with the rig count falling to the lowest since January 2018, as producers cut spending on new drilling and completions.
Hedge funds and other money managers raised their bullish wagers on U.S. crude to a three-month high in the latest week, the U.S. Commodity Futures Trading Commission (CFTC) said.