WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange tumbled in the year's biggest selloff, as concerns over an escalation in the U.S.-China trade war sent shockwaves across oil and equities markets over fear of lost demand followed bearish supply data reported Wednesday.
Comments from China's Ministry of Commerce earlier in the session that the United States needed to reverse "wrong actions" before trade negotiations between Washington and Beijing would resume according to media reports was the latest salvo in tensions between the world's two largest economies. Officials from Washington and Beijing last met May 10.
Markets are now reducing risk in what might be a protracted trade war slowing global trade flow and dampening economic growth.
On Tuesday in its biannual Economic Outlook, the Organization for Economic Cooperation and Development shaved 0.1% off projected global economic growth for this year to 3.3% -- a three-year low -- and cut in half expectations for global trade flow to 2.1%. OECD also projected gross domestic product growth by the United States and China could be cut by 0.2% to 0.3% by 2021 and 2022 if the two countries are unable to resolve their trade dispute and maintain tariffs.
The U.S. dollar reversed down from a 98.26 one-year high in whipsaw index trading. Equities were taking a pounding with the Dow Jones Industrial Average down more than 400 points in late-afternoon trade.
The escalation in the trade war comes one day after the Energy Information Administration reported an unexpected 4.7 million bbl build in U.S. commercial crude oil stocks during the week-ended May 17 that lifted inventory to a nearly 20-month high, suggesting lagging demand in front of the start of the U.S. driving season during the upcoming Memorial Day weekend. Gasoline inventory increased an unexpected 3.7 million bbl during the week profiled, while distillate stocks widened a year-on-year surplus to 12.4 million bbl or 10.9%.
Nymex July West Texas Intermediate futures settled down $3.51 at $57.91 bbl after trading at a $57.33 10-week low on the spot continuous chart, testing support at the $57.40 38.2% Fibonacci retracement point for the 2019 uptrend.
ICE July Brent futures settled down $3.23 at $67.76 bbl, trimming a decline to a $67.02 eight-week high on the spot continuous chart, with support at the $66.78 100-day moving average.
Brent widened its premium to WTI futures to a three-month high at $9.85 bbl, amid the building glut in U.S. commercial supplies despite production cuts from the Organization of the Petroleum Exporting Countries. Geopolitical tensions have also supported Brent's premium.
Nymex June ULSD futures, which traded at a $2.1377 six-month high on the spot continuous chart last week, dropped 8.67cts to a 14-week spot low settlement at $1.9624 gallon. The spot-month ULSD contract tested support at the $1.9509 38.2% retracement point for the fourth quarter downtrend with a $1.9490 intraday low.
Nymex June RBOB futures fell to a better than seven-week low on the spot continuous chart with a $1.9133 settlement, down 7.79cts. The RBOB contract fell to a $1.9002 low, holding above support at $1.888, the 61.8% retracement point for the 2018 downtrend.
Brian L. Milne can be reached at firstname.lastname@example.org
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