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Front-month Brent crude futures, the international benchmark, traded down 2.6% at $63.60, having earlier dipped to their lowest level since mid-February. U.S. benchmark WTI dropped 2.4% to $55.25, its cheapest price since early March.
The steep declines came alongside a broad retreat in riskier assets after President Trump announced a plan to impose escalating tariffs on Mexican imports starting June 10. The U.S. is a major importer of Mexican crude, and refineries relying on the supply could face difficulties replacing it once tariffs are imposed.
Adding to the gloom was disappointing manufacturing data in China, which raised concerns that Beijing’s efforts to rejuvenate growth are faltering in the face of trade tensions with the U.S.
The combination of U.S. sanctions on Venezuela and Iran, along with tariffs on Chinese and Mexican goods, is harming investor confidence in the global economy, analysts said.
“We’ve been focusing a lot on the supply side with the sanctions, the geopolitical risks in the Persian Gulf, but now concerns about global demand are coming back big time,” said Olivier Jakob, founder of Switzerland-based consulting firm Petromatrix.
The latest price fall completes a torrid month for oil markets. Brent is on course to lose more than 11% in May, which would be its worst single month since November.
“It’s kind of a capitulation,” says Carsten Fritsch, an analyst at Commerzbank. “Everyone seems to be throwing in the towel.”
Energy prices made a strong start to 2019 as major producers cut back output, but fears that trade frictions and a downturn in the world economy will hit demand have sent prices spiraling lower in recent weeks.
Mr. Fritsch said energy prices should eventually be underpinned by shrinking production from members of the Organization of the Petroleum Exporting Countries and their allies, including Russia.
Global oil supplies fell by 300,000 barrels a day in April, according to the most recent report by the International Energy Agency, partly driven by declining output in Iran.
In the U.S., the Energy Information Administration reported Thursday that inventories of crude oil fell slightly last week, though the decline wasn’t as much as analysts were expecting.
However, for now, Mr. Fritsch added, “everyone’s obsessed by the possibility of a recession.”