China-Bashing From Trump Causes Crude to Slump as Analysts Worry About Downturn

But the EIA thinks oil use will grow for the next 30 years: File Image/PixaBay

Proving yet again that they are hyper-sensitive to even the most innocuous events on the world stage, traders responded to U.S. president Donald Trump's Tuesday address to the United Nations - in which he accused China of unfair trade practices - by causing crude prices to drop over 2 percent.

After Trump blamed China for "massive" market barriers, currency manipulation, and intellectual property theft, Brent settled $1.67, or 2.6 percent, lower at $63.10 per barrel, while West Texas Intermediate ended at $57.29 per barrel, down $1.35, or 2.3 percent.

Even though Trump reiterated that he wanted to make a deal with China - just not a bad one - analysts such as John Kilduff, founding partner at Again Capital, complained that Trump "ratcheted up the U.S.-China trade war again; it wasn't a constructive tone in trying to get that resolved, and we know how sensitive oil prices are to the back and forth."

Robert Yawger, director of energy futures at Mizuho, added that the president remarks mean that "it's not a deal that's going to get done quickly."

More bad news came on Tuesday in the form of a private sector report showing U.S. consumer confidence falling by the most in nine months in September; this prompted Andy Lipow, president of Lipow Oil Associates, to remark, "We continue to see a constant revision downward for 2019 oil demand," with many forecasters predicting demand to grow around 1 million barrels per day (bpd) or less.

Lipow went on to observe that "Given continued U.S. production growth and new production in Norway and Brazil, the market feels oversupplied, even though Saudi oil production has been impacted over the past 10 days."

John Kemp, commodities analyst for Reuters, contributed to Tuesday's blues by writing that "the broadest indicators of business activity and investor sentiment continue to suggest an economy growing well below trend. Investors are positioning themselves defensively in case growth slows further."

He even went as far to state that "Current data is inconclusive, but business executives and financial investors have started to adopt a more defensive position and prepare for a downturn."

It was left to the Energy Information Administration to offer a level-headed perspective of long term market conditions via its latest report released Tuesday; it stated that although renewables will be the fastest-growing energy source through 2050, oil use will keep climbing for the next 30 years.

The report added that petroleum and other liquids will see their use increase through 2050, even as their share of global energy demand declines to 27 percent from 32 percent over that period.