Oil set for worst two-day drop since July as stock turmoil spreads
LONDON and SEOUL (Bloomberg) -- Oil headed for the biggest two-day drop since July as fears over a worsening trade war rattled global markets.
Futures dropped as much as 2.1% in New York, extending Wednesday’s 2.4% slide. As the U.S.-China trade tensions escalate, investors are shunning risk assets from equities to oil on fears over slowing growth. That comes as Hurricane Michael became the strongest storm to hit the U.S. mainland since 1992, threatening to slash fuel demand in the southeast, while country-wide crude stockpiles are expected to have increased a third week.
“The oil market can not shield itself from the rout in equity markets,” said Norbert Ruecker, head of macro and commodity research at Julius Baer Group Ltd. in Zurich.
Crude has eased after climbing to a four-year high earlier this month. The International Energy Agency has warned surging prices could hit consumption in emerging economies which are already reeling from depreciating currencies. Concerns are building just as U.S. crude inventories are expected to increase as summer demand wanes.
West Texas Intermediate for November delivery declined as much as $1.54 to $71.63/bbl on the New York Mercantile Exchange, and was at $72.48 at 8:57 a.m. local time. Prices closed at the lowest level since Sept. 27 on Wednesday. Total volume traded was about 42% above the 100-day average.
Brent for December settlement was 97 cents lower at $82.12/bbl on the London-based ICE Futures Europe exchange, after falling $1.91 on Wednesday. The global benchmark crude traded at a $9.80 premium to WTI for the same month.
The biggest stock slump since February rolled from the U.S. through Asia and Europe on Thursday, with benchmarks from China to London slumping. The Shanghai Composite dropped 5.2% and the UK’s FTSE 100 slipped as much as 1.9%. The S&P 500 and the Dow Jones Industrial Average declined more than 3% Wednesday.
In the U.S., Hurricane Michael has curtailed 40% of crude output in the Gulf of Mexico. It may lower fuel demand in the U.S. southeastern markets by 1 MMbpd, according to Mizuho Securities. Gasoline futures dropped as much as 2.5% and diesel slumped as much as 1.8%.
