The price of Brent Crude oil slid to a low of $60.21 a barrel this morning, down 1.5 percent on the day and a level not seen in five months. This cost later recovered and a barrel was trading hands at $61.84 by 5.06pm BST. West Texas Intermediate oil fell to as low as $52.49 just hours ago, but had risen to $53.59 at the time of writing. The cost of a barrel of Brent crude has tumbled almost 20 percent in the past month as tensions continue to escalate between the US and China in their increasingly bitter trade war.
The two sides have been locked in a tit-for-tat tariff spat for several months now, unnerving economies worldwide and keeping investors on edge.
The Middle East dominated producer club of the Organization of the Petroleum Exporting Countries (OPEC), together with some allies including Russia, has been withholding supply since the start of the year to prop up the market.
The group plans to decide later this month or in early July whether to continue withholding supply.
OPEC’s de-facto leader Saudi Arabia said on Monday a consensus was emerging for continued cuts in the second half of the year to ensure market stability.
However, the head of Rosneft – Russia’s largest oil producer – said he opposed continued restrictions and would seek compensation if it was unable to boost output.
Merrill Lynch of Bank of America said: “Slowing economic activity now threatens to derail our base case of robust cyclical (oil) demand growth.
“We project Brent and WTI to average $70 per barrel and $59 per barrel respectively in 2019, and $65 per barrel and $60 per barrel in 2020.”
Oil prices were under downward pressure as “the tight supply focus (is) switching to increased risk of lower growth and demand,” said Ole Hansen, head of commodity strategy at Saxo Bank.
He said: “An escalation of the US-China trade war has added further downside risks to already slowing economies.”
ANZ bank said the price falls came “despite OPEC strongly hinting at further production cuts”.
Chetan Ahya, chief economist at Morgan Stanley, this week warned the world could be thrust into recession in as soon as nine months’ time should the US follow through with threats to slap additional tariffs on Chinese imports.
US President Donald Trump recently ramped up tariffs on a list of $200billion worth of Chinese imports from 10 percent to 25 percent.
The American leader has also vowed to slap 25 percent tariffs on an additional $300billion worth of Chinese goods unless the two sides reach an agreement.
China has retaliated to US aggression by raising duties on a revised list of $60billion worth of US products to as high as 25 percent.