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Crude and refined product futures settled sharply lower Thursday as demand growth concerns took center stage following an escalation in the US-China trade war.
NYMEX September WTI settled down $4.63/b at $53.95/b and ICE October Brent was $4.55/b lower at $60.50/b at market close.
Oil futures plunged late Thursday afternoon after President Donald Trump announced the US will impose a 10% tariff on $300 billion worth of Chinese goods September 1, when trade talks between the two countries resume.
Front-month WTI and Brent settled 7.9% and 7.2% lower on the day, respectively, marking the largest single-session percentage slide for prompt-month Brent since February 9, 2016 and for its WTI counterpart since February 4, 2015.
NYMEX September RBOB settled down 11.29 cents at $1.7499/gal and September ULSD was 11.78 cents lower at $1.8529/gal at market close.
The tariff escalation, while scaled back from Trump's earlier threat of a 25% tariff, could spur a fresh round of retaliatory tariffs by China.
Trump made the comments on Twitter after US Secretary of the Treasury Steven Mnuchin and Trade Representative Robert Lighthizer returned from trade talks in Shanghai this week.
The selloff "really points to [the] market's underlying concern about issues of trade, global economic growth and demand," Tradition Energy analyst Gene McGillian said. "I think that we had some support from seven weeks of declining crude inventories and geopolitical risk, but the primary concern in the market now is demand growth. [Trump's tweets point] to an escalation of the trade issue and brought that out of the woodwork again."
Oil futures were already trading well into negative territory ahead of Trump's tweets as the US dollar continued to strengthen after the US Federal Reserve announced it would lower its target interest rate 25 basis points to 2.00%-2.25% at its July meeting Wednesday.
The cut was widely anticipated by most market participants, but initial market enthusiasm was tempered after Fed Chairman Jerome Powell indicated at a post-meeting news conference that the cut may be a mid-cycle adjustment rather than the first in a series of stimulus measures.
Trump's Thursday tariff announcement put the ICE US dollar index slightly lower than on Wednesday, but it was still on pace to settle at levels last seen in May 2017.
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