Global benchmark Brent crude oil had its biggest one-day drop in two years on Wednesday as escalating U.S.-China trade tensions threatened to hurt oil demand, and news that Libya would reopen its ports raised expectations of growing supply, APA reports quoting Reuters.
Brent crude LCOc1 fell $5.46, or 6.9 percent, to settle at $73.40 a barrel. The decline was the largest one-day move on a percentage basis since Feb. 9, 2016. U.S. crude CLc1 fell $3.73, or 5 percent, to $70.38 a barrel.
The sell-off began early in the session after Libya’s National Oil Company said it would reopen ports which had been closed since late June.
“The headline on Libya was merely the trigger,” said John Saucer, a vice president at advisory firm Mobius Risk Group. The sell-off intensified after news of a fall in U.S. crude oil inventories failed to reverse market sentiment.
“The scope of today’s sell-off is unequivocally a speculative washout,” said Saucer. Hedge funds and other money managers with bullish wagers appeared to pare long positions, pulling back from positions added as crude approached three and a half year highs last month, Saucer said.
The selling pressure intensified as trade tensions between the U.S. and China raised concerns about demand. The specter of tariffs on a further $200 billion of Chinese goods sent commodities lower, along with stock markets, as tension between the world’s biggest economies intensified.