WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Intercontinental Exchange Brent crude sank to six-week lows on Thursday. This came after U.S. President Donald Trump announced new tariffs on Chinese imports. Oil futures had already sold off ahead of Trump's announcement following comments from Federal Reserve Chairman Jerome Powell Wednesday afternoon that failed to reassure markets of sustained stimulus through lower borrowing costs.
On the first day of August NYMEX September West Texas Intermediate futures collapsed $4.63 or 7% to a $53.95 barrels (bbl) settlement, while the ICE October Brent contract dropped $4.55 to settle at $60.50 bbl. NYMEX September RBOB futures tumbled 11.29cts to a $1.7499-gallon settlement, and September ULSD futures posted an 11.78 cents loss to end Thursday at a $1.8529-gallon settlement.
Oil futures crashed on Thursday after the White House announced additional tariffs of $300 billion on Chinese imports, sharply escalating the trade dispute between the two countries and stoking fears of a structural slowdown in the global economy. Trump said Thursday afternoon he would impose 10% duties on the remaining imports from China, which were previously not subject to the U.S. tariffs. In addition to 25% duties on $250 billion in Chinese goods, the United States has effectively taxed all imports from China, which now includes iPhones and clothing.
Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer failed to reach a trade deal with a Chinese delegation in Shanghai earlier this week, likely pushing the White House to take a more aggressive stance in trade talks. On Wednesday, Trump administration said negotiations were set to resume in Washington early September, but no update was immediately available Thursday.
Markets were already heading for steep losses earlier in the session after the Federal Reserve announced an expected quarter-point interest rate cut Wednesday afternoon, but indicated a "pause" in further monetary easing this fall. Powell said Wednesday the reversal in a decade-long monetary policy was just a "mid-cycle adjustment," supported by solid employment gains in the U.S. labor market.
"What the market wanted to hear from Federal Reserve was the beginning of a lengthy and aggressive rate-cutting cycle. As usual, Powell let us down," Trump tweeted after Powell press conference Wednesday.
The U.S. dollar spiked to a 98.7 better-than-two year high in index trading today, pressuring dollar-denominated assets and equities, which include oil futures.
U.S. equities reversed early gains following Trump's comments, selling off for a second straight session Thursday afternoon. The Dow Jones Industrial Average was down 280 points and the S&P 500 Index 1% lower on the session near the close.
Liubov Georges can be reached at email@example.com
Copyright 2019 DTN/The Progressive Farmer. All rights reserved.