Bench­mark Brent sees big­gest 1-day fall in 2 years

Business World - - WORLD MARKETS -

NEW YORK — Global bench­mark Brent crude oil had its big­gest one-day drop in two years on Wednes­day as es­ca­lat­ing USChina trade ten­sions threat­ened to hurt oil de­mand, and news that Libya would reopen its ports raised ex­pec­ta­tions of grow­ing sup­ply.

Brent crude fell $5.46, or 6.9%, to set­tle at $73.40 a bar­rel. The de­cline was the largest one-day move on a per­cent­age ba­sis since Feb. 9, 2016. US crude fell $3.73, or 5%, to $70.38 a bar­rel.

The sell-off be­gan early in the ses­sion af­ter Libya’s Na­tional Oil Com­pany said it would reopen ports which had been closed since late June.

“The head­line on Libya was merely the trig­ger,” said John Saucer, a vice-pres­i­dent at ad­vi­sory firm Mo­bius Risk Group. The sell-off in­ten­si­fied af­ter news of a fall in US crude oil in­ven­to­ries failed to re­verse mar­ket sen­ti­ment. “The scope of to­day’s sell­off is un­equiv­o­cally a spec­u­la­tive washout.”

Hedge funds and other money man­agers with bullish wa­gers ap­peared to pare long po­si­tions, pulling back from po­si­tions added as crude ap­proached three and a half year highs last month, Mr. Saucer said.

The sell­ing pres­sure in­ten­si­fied as trade ten­sions be­tween the US and China raised con­cerns about de­mand.

The specter of tar­iffs on a fur­ther $200 bil­lion of Chi­nese goods sent com­modi­ties lower, along with stock mar­kets, as ten­sion be­tween the world’s big­gest economies in­ten­si­fied.

“Es­ca­lat­ing trade ten­sions be­tween the US and China has prompted risk aver­sion in to­day’s trad­ing ses­sion, which is ev­i­dent in oil prices,” said Ab­hishek Ku­mar, se­nior en­ergy an­a­lyst at In­ter­fax En­ergy.

Crude oil prices also fell as the US dol­lar rose on Wednes­day’s sur­pris­ingly strong US in­fla­tion re­port, which in­creased prospects the Fed­eral Re­serve will raise in­ter­est rates twice more this year.

A stronger dol­lar can weaken dol­lar- de­nom­i­nated com­modi­ties, like crude.

“Trade con­cerns have bit­ten to­day,” said Michael McCarthy, chief mar­kets strate­gist at CMC Mar­kets.

“If these tar­iffs are in­tro­duced, there will be an im­pact on global growth and de­mand.” China is a top buyer of US crude, and has said it could tax US oil if trade ten­sions es­ca­late.

Tripoli-based Libya Na­tional Oil Corp. (NOC) said on Wednes­day four ex­port ter­mi­nals were be­ing re­opened af­ter eastern fac­tions handed over the ports, end­ing a stand­off that had shut down most of Libya’s oil out­put.

Libyan oil pro­duc­tion has fallen to 527,000 bar­rels per day ( bpd) from a high of 1.28 mil­lion bpd in Fe­bru­ary fol­low­ing port clo­sures in late June, the NOC said on Mon­day.

“Libyan re­lief changes the con­ver­sa­tion about spare ca­pac­ity,” said John Kil­duff, a part­ner at Again Cap­i­tal Man­age­ment. Con­cerns about a lack of spare ca­pac­ity had led crude to rally.

Prospects of US sanc­tions on crude ex­ports from Iran, the world’s fifth-big­gest oil pro­ducer, has helped push oil prices up in re­cent weeks, with both crude con­tracts trad­ing near 3-1/2-year highs un­til Wednes­day.

US Sec­re­tary of State Mike Pom­peo said on Tues­day that Wash­ing­ton would con­sider re­quests from some coun­tries to be ex­empt from sanc­tions due to go into ef­fect in Novem­ber to pre­vent Iran from ex­port­ing oil. —

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