Brent oil holds losses after falling into bear market on trade war

Oil Resumes Decline as Trade War Overshadows Iran Tanker Seizure

Global equities hit a two-month low and Brent fell more than 3% Monday, as traders anxious the dispute between the world's two biggest oil buyers would lower demand.

On Monday, the 5th of August 2019, both United States and UK crude futures' prices took a tumble of more than 3 percent, as global growth concerns had been trembling financial markets across the world and fueling up frets of a recessed global economy in a near-term outlook, despite USA policymaker's ballooning optimism over U.S. economy.

As a result, Brent settled down $2.71, or 4.6 percent, at $56.23 per barrel, the lowest close since early January (the commodity has plunged almost 14 percent since last week); West Texas Intermediate finished $2.54, or 4.7 percent, lower at $51.09. Prices have lost 24.5 per cent since their 2019 peak in April.

The US Energy Information Administration lowered on Tuesday its oil demand outlook for 2019 to 1 million barrels per day, according to Reuters.

Brent has plunged more than 12 per cent after US President Donald Trump said last week that he would slap a 10 per cent tariff on a further $300bn in Chinese imports from September 1, sending global equity markets into a tailspin, according to Reuters.

Brent for October settlement added 10 cents, or 0.2 per cent, to US$59.04 a barrel on the London-based ICE Futures Europe Exchange as of 8:56am Singapore time after falling 0.6 per cent earlier. EIA forecasts Brent spot prices will average $64/b in the second half of 2019 and $65/b in 2020.

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"The market isn't concerned about anything other than how demand is going to play out through the rest of the year", he said.

This week, the EIA reduced its forecast US demand for crude and liquid fuels. "Assuming there is no recession, oil demand should continue to see robust growth", Commerzbank said in a note. At 438.9 million barrels, US crude oil inventories are about 2% above the five-year average for this time of year.

"We believe the oil market is starting to price in the fear of a severe and multi-year breakdown in U.S".

Tensions in the Middle East remain high after Iran seized a number of tankers in recent weeks in the Strait of Hormuz, a major chokepoint for oil shipments.

U.S. crude oil imports increased, while exports decreased during the week ending August 2, the U.S. Energy Information Administration (EIA) said Wednesday.

The API is scheduled to release its weekly oil report later on Tuesday, while the EIA's inventory data is due out Wednesday morning.

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