Worries of a full-blown trade war and more supply entering the market sent oil futures tumbling to a six-month low on Wednesday, dragging energy stocks with it.
On Wednesday morning West Texas Intermediate crude (CL=F) dropped more than 3% to hover near $65 per barrel while Brent futures (BZ=F) broke below $70 per barrel.
Oil has plunged roughly 5% over the past three sessions amid fears of a tariff war impacting economic growth, more crude supply about to enter the market as recently announced by the Organization of Petroleum Exporting Countries (OPEC), and efforts to end the Ukraine-Russia war.
Read more: What Trump’s tariffs mean for the economy and your wallet
“It’s time to stop this madness. It’s time to halt the killing. It’s time to end this senseless war,” Trump said during his address to Congress on Tuesday night.
The White House has already floated the idea of lifting sanctions against Russia, a move that would allow the oil producer’s energy products to flow more easily into the market.
“If sanctions on Russia are eased, that certainly could put downward pressure on oil, and of course President Trump has promised to lower energy prices. So there are huge implications,” GasBuddy’s Patrick De Haan told Yahoo Finance in a recent interview.
As of 2:19:00 PM EST. Market Open.
CL=F BZ=F
“For now, oil markets are threatening to breach the lower end of the price range oil [has] maintained for the past two years, in the mid-$60’s per barrel according to West Texas Intermediate prices,” Rob Haworth, senior vice president and senior investment strategist at US Bank Asset Management, told Yahoo Finance.
“A breakthrough at that level could lead to more downside, especially if growth indications continue to slow in the US,” he added.
Worries of an escalating trade war have put downward pressure on crude prices.
In a February note, Goldman Sachs analysts said oil prices could fall in the medium term “because persistent broad tariffs would weigh on global GDP and oil demand.”
On Wednesday traders awaited more clarity on whether Trump would give tariff relief to Mexico and Canada. Commerce Secretary Howard Lutnick said on Tuesday the US would likely meet the countries “in the middle” after Canada retaliated with levies on US-made goods in reaction to the Trump administration’s implementation of tariffs against Canada, Mexico, and China.
Oil’s downtrend has also impacted energy stocks.
The S&P 500 Energy Select ETF (XLE) is down more than 1% year to date, erasing its 7% lead among the rest of the sectors registered last month.
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