Oil prices tanked on Wednesday morning after China upped the ante in the trade war, hinting at stifling rare earth minerals exports to the United States-a move that rekindled concern about the global economy and had investors flee risk assets.
As of 09:15 a.m. EDT on Wednesday, WTI Crude was plunging 3.08 percent at $57.32, while Brent Crude was plummeting 2.52 percent at $66.94.
Crude oil followed today yet another global sell-off after signals of an intensifying trade war came out of China.
"Waging a trade war against China, the United States risks losing the supply of materials that are vital to sustaining its technological strength," China's Xinhua news agency said in a commentary, which added to a number of similarly strongly worded commentaries from Chinese newspapers.
China is a dominant exporter of rare earths, and speculation had already started to swirl that China could be using the rare earths trump card in the trade dispute.
"By making unilateral moves to contain technological development of other countries, the United States seems to have overlooked one fact: the international supply chain is so intertwined that no economy could thrive on its own," Xinhua said, noting that "if necessary, China has plenty of cards to play."
The escalation of the trade dispute resulted in another big drop in oil prices on Wednesday morning, as investors focused on the demand side of the oil market. The prospect of a protracted trade war between the world's two largest economies has had investors and traders worried that global economic growth will slow down, dragging down global oil demand growth with it. Oil also got hammered on Wednesday morning because the fear of an economic slowdown had investors flee riskier assets such as oil futures.
Later today, the API will release its weekly U.S. inventory report. The market expects U.S. crude oil inventories to have fallen by 500,000 barrels over the last week, according to ING.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More