The resignation of Gary Cohn, economic adviser to U.S. President Donald Trump, who was seen as a bulwark against protectionist forces in the government, triggered a drop in Wall Street stocks and tempered investor risk appetite. Oil has recently tended to move in tandem with the equity market. The S&P 500 index was last down 0.9 percent. Cohn’s resignation came after he lost a fight over Trump’s plans for hefty steel and aluminum import tariffs. Major powers, including the European Union and China, have said such tariffs could lead to retaliatory action and trigger a global trade war. “The generalized market anxiety over what could end up being a global trade war is dragging everything down,” said John Kilduff, partner at investment manager Again Capital in New York. “It does not bode well for future economic growth and increased energy demand.”
Prices briefly pared losses after data from the Energy Information Administration said U.S. crude inventories rose by 2.4 million barrels in the last week, compared with analysts’ expectations for an increase of 2.7 million barrels. “The smaller-than-expected inventory build led to swift short covering. However, I don’t believe that this strength will be long-lived with rising U.S. production and a strengthening dollar,” said Phillip Streible, senior market strategist at RJO Futures in Chicago. Crude stocks at the Cushing, Oklahoma, delivery hub fell by 605,000 barrels, EIA said.
While oil stocks typically rise this time of year as refineries frequently close for maintenance, an increase in U.S. crude inventories has weighed on prices. U.S. output has also dented sentiment. The EIA said weekly U.S. crude production hit a record high per day last week of almost 10.4 million barrels. The EIA said on Tuesday it expects U.S. crude output in the fourth quarter of 2018 to reach an average of 11.17 million bpd, up from the previous forecast a month ago of 11.04 million bpd. This would make it a bigger producer than Russia, now ranked No. 1. Last year, the United States surpassed Saudi Arabia, the biggest producer in the Organization of the Petroleum Exporting Countries.
