Oil last month posted its worst May performance in seven years as global trade tensions escalated, undermining the outlook for energy demand growth.
Futures tumbled 5.5 percent in New York on Friday to a depth not seen in more than three months.
Equities also plunged as investors deserted risky asset classes for the safety of gold and US Treasuries.
US President Donald Trump’s threat to punish Mexico with tariffs because of illegal immigration darkened already parlous global trade prospects.
Oil surged more than 40 percent to start the year on the strength of OPEC output cuts and crises in Venezuela, Iran and other suppliers.
However, since peaking in late April, prices have fallen off more than 19 percent as the US-China trade dispute intensified.
A jump in US gasoline stockpiles disclosed in a government report this week added to angst about slackening demand.
“People are trading to the market and that’s dragging down oil,” said Jay Hatfield, whose energy-focused Infrastructure Capital Advisors LLC oversees about US$750 million. “People have fears that global GDP is going to be reduced.”
West Texas Intermediate crude for July closed down US$3.09 to US$53.50 a barrel on the New York Mercantile Exchange. The contract was down 7.6 percent for the week.
For the month, the futures were off 16 percent, for the worst May since 2012.
Brent for July settlement on Friday retreated US$2.38 to US$64.49 on London’s ICE Futures Europe exchange, down 4.4 for the week.
The global benchmark crude was trading at a premium of US$10.99 a barrel to WTI, the widest in almost a year.
A key Chinese manufacturing gauge last month dropped more than forecast.
The world’s second-largest economy is mobilizing its state-run energy industry to prepare for a long struggle with the US and has also readied a plan to restrict exports of rare earths, according to people familiar with the matter.
“Given oil markets are tethered to the hip of risk markets currently, this is bad news for oil bulls,” SPI Asset Management head of trading Stephen Innes said.
Hatfield said crude’s slump is an overreaction.
The US economy remains strong, with summer driving season about to kick up fuel demand, while OPEC stands ready to support prices with continued output cuts, he said.
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