Oil prices shed 3% on Wednesday after fresh Chinese and European economic revived global demand fears and US crude inventories rose unexpectedly for the second week in a row. Brent crude settled at $59.48 a barrel, shedding $1.82, or 3%, losing some of the previous session's sharp gains after the United States moved to delay tariffs on some Chinese products.
The global benchmark rose 4.7% on Tuesday, its biggest daily percentage gain since December. US West Texas Intermediate (WTI) crude futures settled at $55.23 a barrel, falling $1.87, or 3.3%, after having risen 4% the previous session, the most in just over a month.
China reported disappointing 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 United States intensifies. The global economic slowdown, amplified by tariff conflicts and uncertainty over Brexit, is also hitting 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. "The data out of China, the potential recession brewing in Germany, all of that is playing into global demand worries," said Phil Flynn, an analyst at Price Futures Group in Chicago. "Today, we're back in fear mode."
The US Treasury bond yield curve inverted for the first time since 2007, in a sign of investor concern that the world's biggest economy could be heading for recession. "With much focus today shifting toward the inversion in the two versus 10-year bond yields, global risk appetite saw another major contraction that easily flowed into the oil space," Jim Ritterbusch, president of Ritterbusch and Associates, said. A second week of unexpected builds in US crude inventories added to the pressure on the oil markets.
US crude stocks grew by 1.6 million barrels last week, compared with analysts' expectations for a decrease of 2.8 million barrels, as refineries cut output, the Energy Information Administration said in its report. At 440.5 million barrels, inventories were about 3% above the five-year average for this time of year, the EIA said in its weekly report.
"Countering this bearish (crude) build has been draws to both gasoline and distillates amid strong implied demand," said Matt Smith, director of commodity research at ClipperData in Louisville, Kentucky. Gasoline stocks fell by 1.4 million barrels, compared with analysts' expectations in a Reuters poll for an increase of 25,000 barrels, as demand jumped to a record 9.93 million barrels per day, according to EIA data going back to 1991.
Comments
Comments are closed.