Oil enters bear market as US-China trade war dents prices
Stock markets have continued to decline across Asia and Europe as fears over the trade war's impact knock demand for oil.
Tuesday 6 August 2019 21:32, UK
Brent crude oil has entered a so-called bear market in a further volatile day for global stocks linked to the escalation in the US-China trade war.
Brent sank 1% to fall below $60 a barrel on Tuesday evening. That left it more than 20% lower than its April peak of above $75.
World oil costs and stock markets have taken a beating recent days after President Donald Trump raised the stakes in his trade spat with Beijing last week - later accusing China of being a currency manipulator as the yuan sank to levels against the dollar not seen for more than a decade.
While US stock markets recovered some ground on Tuesday following their worst daily losses since December, the FTSE 100 followed Asian markets lower - albeit by just 0.7% - to leave it more than 5% down on the week.
Markets.com analyst Neil Wilson said: "We've had such heavy selling I wouldn't be surprised to see some bump-ups as bulls test the water for a dip.
"We should expect things to get worse before they get better.
"There is likely a bit more pain ahead, but I feel the market will eventually turn around."
There is anger in Washington over the weakness of the yuan, which gives Chinese exports a competitive edge over dollar-priced goods.
The yuan has fallen 2.3% in the three days since Mr Trump announced he would impose 10% tariffs on $300bn (£247bn) of Chinese imports from September.
The fall was seen as Beijing trying to offset the incoming US tariffs by trying to make its products cheaper.
Stephen Innes, managing partner at VM Markets Pte, said Beijing had "unleashed their version of shock and that the yuan's weakening had "sent a tsunami of risk aversion across global markets leaving a swath of market carnage in its wake".
US Treasury Secretary Steven Mnuchin vowed to engage with the International Monetary Fund to eliminate what the Treasury described as an "unfair competitive advantage" created by Beijing.
By Tuesday the yuan had pulled back from an all-time low, however.
China's official Communist Party newspaper accused the US of "deliberately destroying international order" and holding its own citizens to ransom.
Despite what Mr Trump has said in the past, tariffs are not paid by China but by US businesses importing Chinese goods.
When US consumers buy the goods in their country, they face higher prices as importers look to recover costs.
Beijing's ministry of commerce has also vowed to suspend promised purchases of US farm products, defying one of America's major conditions for a truce in the trade dispute.
Shipments of US soybeans to China - its most valuable farming export - had already hit their lowest level for 16 years last year.
The Trump administration, which has paid compensation to farmers and is planning to distribute further aid, is yet to say whether its latest scheme would be expanded to account for further losses.
Commenting on the oil price decline - to seven-month lows - Commerzbank analyst Carsten Fritsch said in a note to clients: "As far as the oil market is concerned, there are two key questions:
1) Why should China carry on buying U.S. crude oil? and 2) Why should China continue to adhere to the US sanctions when it comes to buying Iranian oil?".