Oil reversed course Tuesday to trade lower, pulling prices for global benchmark crude back below $60 a barrel and the U.S. benchmark closer to the more-than-one-year low it saw last week.
Concerns surrounding a slowdown in the global economy, on the heels of the ongoing U.S.-China trade dispute, raised expectations for a decline in energy demand and strength in the U.S. dollar Tuesday weighed on dollar-denominated prices of oil, said Phil Flynn, senior market analyst at Price Futures Group.
West Texas Intermediate crude for January delivery CLF9, -0.91%[1] fell 61 cents, or 1.2%, to $51.02 a barrel on the New York Mercantile Exchange, while January Brent crude LCOF9, -1.17%[2] the global benchmark, shed 94 cents, or 1.6%, to $59.54 a barrel on ICE Futures Europe.
China’s ambassador to the U.S., Cui Tiankai, said in an interview with The Wall Street Journal[3] published Monday that it if the trade relations between China and the U.S., as well as the U.S. and other countries continues, “there’s a real risk that the integrating global market might become fragmented.” That raised worries about the global economy and energy demand, said Flynn.
Adding further pressure to dollar-denominated oil prices, the ICE U.S. Dollar Index DXY, +0.31%[4] rose 0.3% after Federal Reserve Vice Chairman Richard Clarida said[5] in a speech Tuesday that he backed continued gradual interest rate hikes.
Oil has seen volatile price swings, with WTI futures plunging 7.7% on Friday for the biggest one-day percentage loss since July 2015. They also settled that day at their lowest since October 2017. On Monday, crude bounced 2.4% higher, for its biggest one-day gain in eight weeks.
Prices had climbed to nearly four-year highs in early October only to plunge into a bear market on fears of a global glut and concerns about world economic growth. The drop has left both grades of crude off more than 30% from their peaks.
But fears of a glut and worries about global growth might both be overdone, said Norbert Ruecker, head of macro and commodity research at Julius Baer.
“Saudi Arabia and its allies depend on petro-revenues, and will most likely partially reverse the supply boost. The selloff cools fuel inflation in emerging markets and demand might suffer less from high prices than earlier feared,” he said, in a note. “With oil in the high $50s, the shale industry likely reconsiders its...