Oil slumps 5%, US crude at its cheapest since March

Oil prices plunged about 5% on May 23, with US crude at its lowest since March, as trade tensions dampened the demand outlook, putting the crude benchmarks on course for their biggest daily and weekly falls in six months.

World shares were deep in the red as concerns grew the China-US trade conflict was fast turning into a technology cold war between the world's two largest economies.

"Again, we're seeing the effect of worries about the trade issue on demand," said Gene McGillian, Vice President at Tradition Energy in Stamford, Connecticut. Funds and money managers who had built up long positions are "heading to the exits" as trade concerns dim the demand outlook, he said.

Brent crude futures, the international benchmark, hit a session low of $67.53 per barrel, trading down $3.15, or 4.5%, at $67.84 by 11:19 a.m. EDT (1519 GMT).

Meanwhile, US West Texas Intermediate (WTI) crude futures were down by $3.21, or 5.2%, at $58.19 per barrel. The contract earlier fell to a session low of $57.92, the lowest since March 15.

WTI dropped 2.5% on Wednesday after government data showed that US crude inventories rose last week, hitting their highest levels since July 2017.

While the ongoing trade war between the United States and China is the main cloud over economic growth and demand predictions, other bearish factors also weighed on the market.

Euro zone business growth accelerated less than expected this month, a survey showed. IHS Markit's Purchasing Managers' Index (PMI), which is considered a good guide to economic health, only nudged up to 51.6 this month from a final April reading of 51.5, below the median expectation in a Reuters poll for 51.7.

Additionally, tensions between the US and Iran are decreasing, some analysts said.

"The administration seems to be tamping down the president's rhetoric on Iran," said John Kilduff, a partner at Again Capital in New York.

The oil market has built in risk premium related to US sanctions on Iran, and that risk is now seen decreasing, he said.

Countering these bearish factors are ongoing supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC).

French bank BNP Paribas said high inventories meant that OPEC would likely keep its voluntary supply cuts in place beyond their current end-June deadline.

Global geopolitical risk was still sufficient to provide a floor for oil prices, said Again's Kilduff.

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