Less than a day after one noted expert called China and its relations with the US the most important geopolitical issues facing crude by far, the latest developments in the trade war with those countries caused crude prices on Thursday to tumble by a massive 5.7 percent.
Oil prices plunged on Thursday, losing about 5 per cent as trade tensions dampened the demand outlook, putting the crude benchmarks on course for their biggest daily and weekly falls in six months.
Surging U.S. inventories weighed heavily on U.S. West Texas Intermediate and worldwide benchmark Brent crude oil futures throughout the week.
The American Petroleum Institute (API) said on Tuesday that USA crude stockpiles rose by 2.4 million barrels last week, to 480.2 million barrels, compared with analyst expectations for a decrease of 599,000 barrels.
U.S. West Texas Intermediate crude futures were up 1.1 percent at $58.55.
Weekly U.S. rig count data, an indicator of future output, showed U.S. energy firms this week reduced the number of oil rigs operating for a third week in a row.
Rising U.S. crude production has also weighed on oil prices. This was not good news after it was also learned there was a slowdown of U.S. refinery runs, despite the fact that we are coming up on the long Memorial Day weekend, the start of peak summer driving activity in the U.S. The EIA also said total motor gasoline stockpiles have increased by 3.7 million barrels during the week ended May 17, against forecasts for a drop of almost 816,000 barrels.More news: Facebook probes Instagram influencer data breach
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Markets will be closed on Monday in Britain for the Spring Bank Holiday and in the United States for the long Memorial Day holiday weekend, start of summer vacation driving season.
However, analysts said oil markets remained tight amid supply cuts led by producer group OPEC and as political tension escalates in the Middle East.
The Organisation of the Petroleum Exporting Countries (OPEC) and allies including Russian Federation, an alliance known as OPEC+, have been cutting supply since January to tighten the market and prop up prices.
While many macro investors and generalists watch outright oil prices move higher or lower, specialized oil traders tend to monitor term structure, or, the spread between contract months as an indication of supply and demand.
Nevertheless, the recent price action in crude raises the risk for a larger correction as the price of oil snaps the monthly opening range, with the downside targets now on the radar as crude prices fail to preserve the upward trend from earlier this year.
A shipment of crude oil, by contrast, can often change hands multiple times between when it leaves port and arrives at its destination. -China trade dispute is affecting the US economy.