Oil prices plummeted more than 7% on Thursday to the lowest level in about seven weeks, after U.S. President Donald Trump said he would impose an additional 10% tariff on $300 billion worth of Chinese imports starting Sept. 1.
A prolonged trade war between the world’s two largest economies has triggered worries about oil demand.
Brent crude LCOc1 fell $4.55, or 6.99%, to settle at $60.50 a barrel, having dropped as low as $60.02, the lowest since June 13. The international benchmark’s decline on Thursday was its biggest daily percentage drop since Febuary 2016.
U.S. West Texas Intermediate (WTI) CLc1 crude ended the session down $4.63, or 7.9%, at $53.95 after sinking to a low of $53.59, the lowest level since June 19. It was the biggest percentage decline since February 2015.
“Oil prices have fallen considerably today, done in by a one-two punch of the underwhelming Federal Reserve easing moves and the announcement by President Trump that more tariffs will be placed on imported Chinese goods,” said John Kilduff, partner at Again Capital Management.
“The U.S.-China trade war has damaged the energy demand outlook greatly, already, and this will only add to those concerns,” he said. “The trade war is clearly far from over.”
Prices had fallen earlier on continued reaction to the Fed’s policy decision on Wednesday. The Fed cut rates as expected, but market sentiment took a turn on remarks by Fed Chairman Jerome Powell that the move might not be the start of a lengthy series of cuts to shore up the economy against global economic weakness.
The Fed’s less-dovish-than-expected message triggered a rebound in the dollar, sending the dollar index .DXY to a 26-month high of 98.93 on Thursday. A stronger dollar makes greenback-denominated oil more expensive for holders of other currencies. The dollar index turned negative after Trump’s comments on tariffs.
Crude prices could see bearish momentum remain after breaking below critical support levels on Thursday, said Edward Moya, senior market analyst at OANDA in New York.