Economy

Saudis contact oil firms in response to seven-month low

Saudis contact oil firms in response to seven-month low

Oil prices tumbled more than 4% on Wednesday to a seven-month low, extending recent heavy losses following a surprise build in USA crude stockpiles and fears that demand will shrink due to Washington's escalating trade war with Beijing.

Brent for October settlement climbed $1.15 to settle at $57.38 on the ICE Futures Europe Exchange.

West Texas Intermediate oil for September delivery advanced $1.49, or 2.9%, to $52.58/bbl on the New York Mercantile Exchange as of 9:01 a.m. local time, after rising as much as $1.75 earlier.

WTI traded in the green zone temporarily on late Tuesday, up to $55.43 is now off 18% from its 2019 peak of $66.31 reached April 23.

"Trade war rhetoric will continue to guide markets, but the comments from Saudi Arabia could lead to unprecedented action to stabilize prices", said Alfonso Esparza, a Toronto-based senior market analyst at Oanda.

Brent has plunged more than 10 percent over the past week after US President Donald Trump said he would slap a 10% tariff on a further $300 billion in Chinese imports from September 1, sending global equity markets into a tailspin.

Crude oil futures hit their lowest levels since early 2019 on Wednesday after data from Energy Information Administration showed a significant jump in USA crude stockpiles in the week ended August 2, after seven successive weeks of declines.

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Oil bounced from the lowest level since January after Saudi Arabia contacted different producers to discuss choices to stem a rout that's been driven by the aggravating U.S. -China trade dispute could further dampen demand growth this year. There will also be modest cuts to Asian buyers.

The oil markets extended losses after USA government data showed that United States crude stockpiles rose unexpectedly last week, increasing 2.4 million barrels, compared with analysts' expectations for a decrease of 2.8 million barrels.

"We believe that the oil market is now in a phase of exaggeration".

Tensions in the Middle East remain high after Iran seized a number of tankers in recent weeks in the Strait of Hormuz, a major chokepoint for oil shipments.

Rystad Energy said the oil market was going "from gloomy to gloomier", calling into question the consultancy's own bullish view for the first part of 2020.

Crude has fallen about 10% this month as a deterioration in relations between the world's two biggest economies worsens an already bleak consumption outlook.

Saudi Energy Minister Khalid al-Falih and U.S. Energy Secretary Rick Perry on Tuesday expressed mutual concern over threats targeting freedom of maritime traffic in the Gulf.