Oil just fell into a bear market. Here’s why Trump’s trade war is to blame.
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- West Texas Intermediate Crude Oil entered a bear market, down 21% from its April peak.
- Analysts say global growth fears, exacerbated by President Trump’s trade war, are to blame.
- The commodity has been consistently positive since the start of 2019, but its steep decline in recent weeks underscores the volatility that geopolitical uncertainty has injected into global markets.
- Follow live crude oil trading.
President Donald Trump’s trade disputes with his major international trading partners have claimed another casualty.
West Texas Intermediate (WTI) crude oil slid on Thursday after falling into a bear market the day before, plunging more than 20% from its peak in late April. The commodity was trading near $51.70 a barrel.
The severe slowdown in weeks comes as oil traders worry about slowing global growth that the Trump administration’s unresolved trade disputes with China and Mexico have only exacerbated.
“Prices crashed as the trade war spread beyond the United States and China,” investment strategists at US Bank Wealth Management told clients earlier this week.
While the commodity has still registered a 14% gain since the start of the year, its decline in recent weeks underscores the turmoil that has plagued global financial markets as trade uncertainty and slowing global growth s ‘install.
Read more: Trump’s latest trade war grenade pushes the global economy into a no-win scenario
The price of crude oil also increased significantly during the first months of the year, with a rise of 46% from January to the end of April.
Some strategists say the market is also skeptical of major oil producers reaching a production deal.
“Despite a meeting scheduled for June 10 between the Saudi and Russian energy ministers to discuss extending production cuts, energy markets have not found support,” Markets Insider told Thursday. Phil Streible, senior strategist at RJO Futures in Chicago. “I expect crude oil to continue to be pressured by weaker demand and oversupply.”
Indeed, the positioning of traders reflects current bets for a steeper decline.
The market’s net long position fell further last week, with positions now in the middle of their historical range, according to a Deutsche Bank analysis of Commodity Futures Trading Commission data.
Weekly data released Wednesday by the US Energy Information Administration was another factor that weighed on energy markets.
The EIA report reflected an increase in inventories, while analysts expected a “slight decline”, Raymond James Energy analysts led by J. Marshall Adkins told investors Thursday. Oil inventories rose by about 22 million barrels, the biggest jump since 1990.
This report weighed heavily on WTI and Brent crude, which settled at $51.51 and $60.50 respectively.
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