NEW YORK (Reuters) - Oil prices tumbled on Wednesday as financial markets slid amid concerns that Washington’s plans for import tariffs could spark a trade war, and after U.S. government data showed an increase in crude inventories and output.
Brent crude futures for May delivery fell $1.45 to settle at $64.34 a barrel, a 2.20 percent loss. Brent traded between $63.83 and $65.80 during the session.
West Texas Intermediate (WTI) crude futures for April delivery fell $1.45 to settle at $61.15 a barrel. It fell 2.3 percent on the day, its biggest daily percentage loss since Feb. 9, and traded between $60.58 and $62.58.
The resignation of Gary Cohn, economic adviser to U.S. President Donald Trump, who was seen as a bulwark against protectionist forces in the government, triggered a drop in Wall Street’s three main stock indexes and tempered investor risk appetite. Oil has recently moved in tandem with the equity market.
Cohn’s resignation came after he lost a fight over Trump’s plans for hefty steel and aluminum import tariffs.
Major powers, including the European Union and China, have said such tariffs could lead to retaliatory action and trigger a global trade war.
“The generalized market anxiety over what could end up being a global trade war is dragging everything down,” said John Kilduff, partner at investment manager Again Capital in New York. “It does not bode well for future economic growth and increased energy demand.”
A further increase in U.S. output also weighed on prices. Weekly data from the U.S. Department of Energy showed weekly U.S. crude production hit a record high last week of almost 10.4 million barrels per day (bpd).
“We had the rig count flatten out a bit and start to rise again this year from the oil perspective, so you’re going to continue to see oil production in the U.S. be fairly strong for an extended period of time here,” said Rob Thummel, portfolio manager at energy investment manager Tortoise Capital in Leawood, Kansas.
The EIA said on Tuesday it expects U.S. crude output in the fourth quarter of 2018 to reach an average of 11.17 million bpd, up from the previous forecast a month ago of 11.04 million bpd.
This would make it a bigger producer than Russia, now ranked No. 1. Last year, the United States surpassed Saudi Arabia, the biggest producer in the Organization of the Petroleum Exporting Countries.
Prices briefly pared losses on Wednesday after data from the Energy Information Administration said U.S. crude inventories rose by 2.4 million barrels in the last week, compared with analysts’ expectations for an increase of 2.7 million barrels.
Crude stocks at the Cushing, Oklahoma, delivery hub fell by 605,000 barrels, EIA said, the 11th straight week of declines.
While oil stocks typically rise this time of year as refineries frequently close for maintenance, sustained increases in U.S. crude inventories has weighed on sentiment.
Additional reporting by Amanda Cooper in London and Henning Gloystein in Singapore; Editing by Susan Thomas and Chizu Nomiyama