Oil prices slumped on Wednesday on weak economic data from China and Europe and a rise in United States (U.S.) crude inventories, almost erasing the previous session’s sharp gains after the U.S. said it would delay tariffs on some Chinese products.
Brent crude was down $2.08, or 3.4 per cent, at $59.22 a barrel, after rising 4.7 per cent the previous day, the biggest percentage gain in a day since December.
U.S. West Texas Intermediate (WTI) crude futures were down $2.13, or 3.7 per cent, at $54.97 a barrel, having risen four per cent the previous session, the most in just over a month.
China reported a raft of unexpectedly weak data for July, including a surprise drop in industrial output growth to a more than 17-year low, underlining widening economic cracks as the trade war with the U.S. intensifies.
“This morning’s Chinese industrial production came in below expectations confirming our expectation that the late-cycle dent likely becomes deeper before year-end,’’ Norbert Ruecker of Swiss bank Julius Baer said, referring to the late-cycle phase in economies that are characterised by slowing growth.
“Oil demand should continue to soften,’’ he added.
The global slowdown amplified by tariff conflicts and uncertainty over Brexit is also pressuring European economies.
A slump in exports sent Germany’s economy into reverse in the second quarter, data showed.
The euro zone’s GDP barely grew in the second quarter of 2019.
Profit-taking after the previous day’s sharp gains also weighed on crude prices yesterday, analysts said.
Benchmark crude prices surged on Tuesday after U.S. President Donald Trump backed off his Sept. 1 deadline for 10 per cent tariffs on some products, affecting about half of the $300 billion target list of Chinese goods.
“While Brent crude has recovered back above $60 a barrel, the technical outlook for WTI looks somewhat better after once again managing to find support above $50 a barrel,’’ Head of Commodity Strategy at Saxo Bank, Ole Hansen, said.
“The range-bound behaviour, however, looks set to continue with a focus on U.S.-China trade talks and continued production restraint from OPEC, led by Saudi Arabia.’’
Data from industry group the American Petroleum Institute (API) showed U.S. crude stocks unexpectedly rose last week.
Crude inventories increased by 3.7 million barrels to 443 million, compared with analyst expectations for a decrease of 2.8 million barrels, the API said.