Brent crude, the international oil benchmark, was on track for its biggest loss of the year so far on Thursday, as traders weighed the risks from a US-China trade war and rising inventories in the US.
Brent was down 4.9 per cent in mid-afternoon trading in London to $67.51 a barrel, having dropped through the $70 a barrel mark earlier in the day. US marker West Texas Intermediate lost 6 per cent to trade at $57.74 a barrel.
The sell-off weighed on oil companies traded in London, with BP and Royal Dutch Shell both losing nearly 3 per cent, while midsized oil and gas explorers were some of the biggest fallers on the FTSE All-Share index.
The index tracking oil and gas companies on the FTSE 350 was down 2.8 per cent. Premier Oil fell 13.6 per cent, Genel Energy lost 10.7 per cent, while Tullow was down 7.9 per cent.
In the US, energy was the worst performing sector on the S&P 500, falling 3.9 per cent.
Oil’s slide comes despite mounting geopolitical tensions in the Middle East, with traders instead preoccupied with the fallout from the US-China trade war and its potential impact on oil demand growth.
Physical supplies of crude are seen as relatively tight due to US sanctions on Iran and Venezuela, and Opec-led production cuts, but stockpiles have been rising in the US, the world’s largest oil consumer and the heart of the shale boom.
Crude inventories in the US hit the highest level in two years last week, the US Energy Information Administration said on Wednesday.
The perceived risk of holding the debt of junk-rated issuers in the US energy industry picked up on Wednesday, according to data from Intercontinental Exchange and Bank of America Merrill Lynch. The gap in yield between a basket of bonds tracking companies in the sector and highly rated government debt climbed to 5.87 percentage points, from 5.77 the previous day.