(Bloomberg) -- Brent oil slid into bear-market territory, as the U.S.-China trade spat threatened to expand into a currency war and investors despaired about the damage to crude demand.
The rout for London-traded futures picked up speed as Tuesday’s session drew to a close, with Brent ending the day down 1.5%. The global benchmark has now fallen more than 20% since a late-April peak, meeting the common definition of bear market.
Futures held their losses despite an industry report that U.S. crude stockpiles fell for an eighth straight week, which would be the longest run of declines in 19 months if confirmed by government data on Wednesday. The Trump administration had earlier declared China a currency manipulator, opening the potential for even harsher impacts on global trade.
“We shouldn’t underestimate the potential impact of a full-blown trade war between the world’s two biggest economies,” said Bart Melek, head of global commodity strategy at TD Securities. “This could very well mean we as a market significantly overestimated demand growth for oil and we could easily be in a surplus situation in 2020.”
Brent crude prices are down more than 9% this month as global economic worries eclipse the threat of supply disruptions in the Middle East. Iran could step up its operations against tankers passing through the Strait of Hormuz, the world’s most important oil chokepoint, Foreign Minister Javad Zarif said on Monday.
Brent for October settlement fell 87 cents to settle at $58.94 a barrel on the London-based ICE Futures Europe Exchange.
West Texas Intermediate for September delivery lost $1.06, or 1.9%, to $53.63 a barrel on the New York Mercantile Exchange. WTI for October traded at a discount of $5.35 to Brent for that month, a gap that’s narrowed markedly in recent days as trade fears undercut the outlook for global oil prices.
Brent fell to $58.86 at 4:47 p.m., after the oil stockpiles report; WTI was at $53.53.
Declining crude supplies have offered a partial counterbalance to the economic outlook. The American Petroleum Institute on Wednesday said inventories fell by 3.43 million barrels last week, according to people familiar with the data. Gasoline stockpiles also fell.
The U.S. Energy Department is due to release official figures on Wednesday.
--With assistance from Tsuyoshi Inajima and Sophie Caronello.
To contact the reporters on this story: Alex Nussbaum in New York at email@example.com;Grant Smith in London at firstname.lastname@example.org
To contact the editors responsible for this story: David Marino at email@example.com, Carlos Caminada
For more articles like this, please visit us at bloomberg.com
©2019 Bloomberg L.P.