Crude took a turn lower amid an equity selloff largely pinned to growing apprehension about a potential trade war with China.
Futures edged down 1.3 percent in New York on Thursday after topping $65 a barrel this week for the first time since early February. U.S. stocks fell and Treasuries jumped as President Donald Trump formally ordered tariffs on $50 billion in Chinese goods, stoking fears of retaliatory measures by the Asian giant.
“It’s simply a risk-off type of day for all global risk assets,” said Bob Yawger, director of futures at Mizuho Securities USA Inc. in New York. “Considering the scope of yesterday’s rally, a little bit of a pullback shouldn’t come as all that much of a surprise.”
The decline in crude prices is probably a temporary blip. OPEC’s output reductions have lowered inventories, with stockpiles in the U.S. falling below the five-year average for the first time since 2014. Meanwhile, Morgan Stanley sees London-traded Brent crude reaching $75 a barrel by the third quarter and also said geopolitical risks tend to be exacerbated when the supply cushion is thin. Read More