LONDON: Oil prices fell further on Wednesday, extending recent heavy losses as deepening US-China trade tensions weighed on the outlook for the global economy and energy demand.
Brent crude futures were down 70 cents, or 1.2 percent, at $58.26 a barrel in early afternoon trade in London, setting a fresh seven-month low. Prices have lost more than 20 percent since hitting their 2019 peak in April.
US West Texas Intermediate (WTI) crude futures were down 38 cents, or 0.7 percent, at $53.25.
Brent has plunged more than 10 percent over the past week after US President Donald Trump said he would slap a 10% tariff on a further $300 billion in Chinese imports from Sept. 1, sending global equity markets into a tailspin.
“The market continues to grow more uncertain about the demand outlook given the deterioration of trade talks between China and the US,” ING analysts said in a note.
The bank lowered its 2019 price outlook, mostly because of demand concerns, forecasting that global oil supplies will exceed consumption in the first half of next year.
The price of Brent crude has fallen by about 10 percent over the past week.
Trump on Tuesday dismissed fears that the trade row with China could be drawn out further. His comments failed to prevent shares in Asia from falling for an eighth straight session on Wednesday. London’s FTSE 100 gained.
“We believe that the oil market is now in a phase of exaggeration. Demand is not sufficiently weak to justify the current price performance. Assuming there is no recession, oil demand should continue to see robust growth,” Commerzbank said in a note.
Tensions in the Middle East remain high after Iran seized a number of tankers in recent weeks in the Strait of Hormuz, a major chokepoint for oil shipments.
Saudi Energy Minister Khalid Al-Falih and US Energy Secretary Rick Perry on Tuesday expressed mutual concern over threats targeting freedom of maritime traffic in the Gulf.
“There are concerns that an event could occur at any moment ... the risk might be shifting to the upside in the near term for oil contracts,” said Michael McCarthy, chief market strategist at CMC Markets.
Elsewhere, data indicating a larger-than-expected drop in US crude stocks offered some support to oil prices after several weeks of large draws on inventories.
Official data from the government’s Energy Information Administration (EIA) is due on Wednesday.
The EIA on Tuesday lowered its domestic oil growth forecasts for the year after Hurricane Barry disrupted Gulf of Mexico output in July. Production is set to rise by 1.28 million barrels per day to 12.27 million bpd this year.