Oil prices plummeted more than 7% on Thursday, with the U.S. benchmark posting its worst day in more than four years, after President Donald Trump said he would impose additional tariffs Chinese imports starting Sept. 1.
The drop in Brent crude was the steepest in more than three years, undoing a fragile oil rally built on steady drawdowns in U.S. inventories even as global demand looked shaky due to the U.S.-China trade dispute.
Trump's announcement of an additional 10% levy on $300 billion worth of Chinese goods undermined hopes that the world's two largest economies had reached a detente in a year-long conflict that has weakened growth worldwide.
Brent crude fell $4.55, or 6.99%, to settle at $60.50 a barrel, after having dropped to $60.02, its lowest level since June 13. The international benchmark's decline on Thursday was its biggest daily percentage drop since February 2016.
- S. West Texas Intermediate (WTI) crude ended the session down $4.63, or 7.9%, at $53.95 after sinking to a low of $53.59, the lowest level since June 19. It was the biggest percentage decline since February 2015. More than 836,000 contracts changed hands, surpassing the daily average of about 623,000 contracts, according to Refinitiv Eikon data.
"The U.S.-China trade war has damaged the energy demand outlook greatly, already, and this will only add to those concerns," said John Kilduff, partner at Again Capital Management. "The trade war is clearly far from over."
Wall Street abruptly reversed its gains following Trump's tweets, after spending most of the session on track for the best day since June. Bond prices also rose, causing yields to drop as investors sought out safe assets.
Oil prices were already weak on continued reaction to the Federal Reserve on Wednesday. The Fed cut rates as expected, but market sentiment turned negative after Fed Chairman Jerome Powell said the move might not be the start of a lengthy series of cuts to shore up the economy against global weakness.