Crude Oil Benchmark Brent Sees Biggest One-Day Fall In Two Years

Crude Oil Benchmark Brent Sees Biggest One-Day Fall In Two Years

West Texas crude is steeply off of recent highs, with WTI collapsing almost 5% on Wednesday. Brent was on track for the biggest single-day percentage decline since February 2016.

"Escalating trade tensions between the USA and China has prompted risk aversion in today's trading session, which is evident in oil prices", said Abhishek Kumar, senior energy analyst at Interfax Energy.

The sell-off intensified after news of a fall in USA crude oil inventories failed to reverse market sentiment.

"Trade concerns have bitten today", said Michael McCarthy, chief markets strategist at CMC Markets.

The announcement of the country's National Oil Corp on Wednesday effectively ended a tense political standoff that had shut down most of the country's oil output.

In addition, overall crude imports declined on the week, falling to 7.4 million barrels per day, off by 1.3 million bpd from the week-earlier period.

"Libyan relief changes the conversation about spare capacity", said John Kilduff, a partner at Again Capital Management.

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The global energy watchdog, however, said the disruptions underscored the pressure on global supplies as the world's spare production capacity cushion "might be stretched to the limit".

Adding to the bearish mood were signs of a possible relaxation of USA sanctions on Iranian crude exports.

The expected drop in Iranian crude exports this year due to renewed USA sanctions, coupled with a decline in Venezuela's production and outages in Libya, Canada and the North Sea have driven oil prices to their highest since 2014 in recent weeks.

Prices were further pressured after U.S. Secretary of State Mike Pompeo said on Tuesday that Washington would consider requests from some countries to be exempt from sanctions due to go into effect in November to prevent Iran from exporting oil. This action would substantially weaken demand for U.S. WTI crude oil.

The falls came despite a U.S. government report that American crude oil stockpiles fell by more than 12 million barrels last week and are about 4% lower than average for this time of year.

Saudi Arabia might have to draw harder than ever before on its spare production capacity as a spiraling economic crisis in Venezuela, renewed USA sanctions on Iran and disruptions in Libya strain global markets, the agency predicted.

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