Oil Settles Near Two-Week Lows

NEW YORK (DTN) -- New York Mercantile Exchange spot-month oil futures settled near two-week lows Monday afternoon on the back of a selloff in U.S. equities. This was amid concern over a potential trade war between the world's two largest economies and new data showing an increase in crude supply at the Cushing depot in Oklahoma, the delivery point for the benchmark West Texas Intermediate crude contract.

"The selloff in oil was all about the stock market amid light volume and we also got caught up in the fears over trade war with China, which could weigh on demand," said analyst Phil Flynn at Price Futures in Chicago.

The Dow Jones Industrial Average plunged more than 600 points at one point this afternoon, closing down 459 points while the S&P 500 Index tumbled nearly 60 points and the Nasdaq 100 Index lost nearly 200 points amid risk-off trade.

The selloff followed the decision by China to impose tariffs of 15-to-25% on 128 U.S. food and agricultural products in response to recent tariffs on imported steel and aluminum by the United States. The U.S. tariffs on imported steel and aluminum are seen targeting China after exemptions were granted to the European Union, Brazil, South Korea, Canada, and Mexico.

China's tariffs, which are seen as retaliatory and effect $3 billion worth of U.S. goods including, meat, nuts, fruits and ethanol, were announced Sunday by the country's finance ministry and took effect Monday.

NYMEX May ULSD futures settled 4.08cts lower at $1.9802 gallon, with May RBOB futures plunging 5.45cts to settle at $1.9661 gallon. Today is the first session with the May contracts in the front month delivery position.

NYMEX May WTI crude futures settled down $1.93 at $63.01 bbl, near a $62.95 bbl. June Brent on the Intercontinental Exchange dropped $1.70 to a $67.64 settlement.

WTI futures were further pressured after Genscape today reported a 3.6 million bbl increase in crude oil stockpiles at the Cushing terminal during the week-ended March 30, which would mark the fourth consecutive supply build at the closely watched tank farm if corroborated by the Energy Information Administration on Wednesday. Cushing stocks entered March at a 28.2 million bbl better-than three-year, three-month low.

The Genscape data is above estimates by analysts for a 1.5 million bbl build at Cushing, with expectations for total U.S. commercial crude supply to have increased by 2.0 million bbl during the final week of March. Current expectations for gasoline and distillate fuels are for 3.0 million bbl drawdowns.

George Orwel can be reached at george.orwel@dtn.com