After finishing at a three-month low on Thursday, oil prices continued to slide on Friday morning and are on course to end the month of May with the largest monthly drop since last November, as trade tensions weigh on investors’ outlook on the global economy and oil demand.
Oil prices were down for most of the last week of May and are now set for their biggest monthly decline in six months, since November 2018, as intensifying trade tensions outweighed U.S. crude oil stockpiles draws.
The price of oil 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.
Later on Wednesday, oil prices rose after the American Petroleum Institute (API) reported a large draw in crude oil inventory of 5.265 million barrels for the week ending May 24, coming in over analyst expectations of an 857,000-barrel drawdown.
On Thursday, the EIA reported a crude oil inventory draw of 0.3 million barrels for the week to May 24, but this smaller than expected draw sent oil prices down later in the day.
On Friday, poor economic data from China and another trade tariff spat weighed again on equity markets and on oil prices.
China’s manufacturing activity shrank more than expected, government data showed, making investors wonder how fast Chinese growth is slowing and how the U.S.-China trade war will weigh on economic growth in China and the rest of the world.
President Trump said on Thursday that the U.S. is imposing a 5-percent tariff on all goods imported from Mexico starting June 10, to make Mexico resolve the “illegal migration crisis”. If Mexico fails to alleviate the crisis, tariffs will gradually rise until they reach 25 percent, President Trump said.
By Tsvetana Paraskova for Oilprice.com
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