Brent Extends Loss After Entering Bear Market
(Bloomberg) -- Brent crude extended losses after falling into bear market as concern the U.S.-China trade war will continue to sap demand outweighed an industry report showing American crude stockpiles are still shrinking.
Futures in London edged lower after closing down 1.5% Tuesday, taking their decline from a late-April peak to more than 20%. China’s central bank set the yuan fixing weaker than expected as Washington and Beijing argue about whether the currency is being manipulated. The American Petroleum Institute reported that nationwide crude inventories fell by 3.4 million barrels last week, according to people familiar with the data.
Brent crude has fallen around 10% this month as the deteriorating relationship between the world’s two largest economies damped the global growth outlook, eclipsing the threat of supply disruptions in the Persian Gulf. The ratcheting up of trade tensions in the past week has spurred speculation that China will start avoiding buying American oil in anticipation that Beijing will impose tariffs.
“There is no doubt the U.S.-China conflict will be extended for a long period of time, even though it’s not clear what will happen next,” said Miyoko Nakashima, a senior strategist at Mizuho Securities Co. in Tokyo. West Texas Intermediate crude could fall as low as $45 a barrel this year, she said.
Brent for October settlement declined 18 cents, or 0.3%, to $58.76 a barrel on the London-based ICE Futures Europe Exchange as of 7:42 a.m. in London after falling as much as 0.6% earlier. The global benchmark traded at a premium of $5.29 to WTI for the same month.
WTI oil for September delivery declined 13 cents, 0.2%, to $53.50 a barrel on the New York Mercantile Exchange. The contract settled 1.9% lower on Tuesday.
Traders are watching the yuan daily fixing closely after China’s central bank allowed the currency to weaken past a previously defended level of 7 per dollar for the first time in more than a decade on Monday. That prompted the U.S. Treasury Department to label China an exchange-rate manipulator and raised fears the trade war was morphing into a currency war. The U.S. still expects Chinese negotiators to come to Washington for another round of trade talks in September, White House economic adviser Larry Kudlow said Tuesday.
If the decline in American crude stockpiles is confirmed by Energy Information Administration data due Wednesday, it will be the eighth consecutive weekly drop. Inventories shrank by 2.7 million barrels in the week through Aug. 2, according to the median estimate in a Bloomberg survey.
To contact the reporter on this story:
Tsuyoshi Inajima in Tokyo at firstname.lastname@example.org
To contact the editors responsible for this story:
Serene Cheong at email@example.com
Andrew Janes, Heesu Lee
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.