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Oil Continues to Sink as Trade Wars Escalate, US Supply Report Disappoints

May 31, 2019 at 10:44 by Vladimir Vyun

Crude oil logged huge losses yesterday, falling more than 4% during the trading session. Today, the commodity continued to move down, falling more than 2%. As a result of the huge drop, crude was heading for the biggest monthly decline in six months.

One of the reasons for the oil’s underperformance was risk aversion causing by escalating trade wars. US President Donald Trump spooked market participants, vowing to slap tariffs on all Mexican goods unless the country stops flow of illegal migrants. Trade wars threaten global economic growth, and crude oil, being a commodity directly linked to growth, suffers as a result.

Another negative factor for crude was yesterday’s supply report from the Energy Information Administration. It showed that US oil stockpiles fell by just 0.3 million barrels last week. Market participants were hoping for a bigger drop by 0.9 million barrels.

Futures for delivery of WTI crude oil in July declined 2.01% to $55.45 per barrel as of 10:39 GMT on NYMEX today. Brent crude slumped as much as 2.98% to $64.88 per barrel on ICE.

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