Oil prices tanked on Wednesday after China upped the ante in the trade war, hinting at stifling rare earth minerals exports to the United States (U.S.)—a move that rekindled concern about the global economy and had investors flee risk assets.
WTI Crude plunged 3.08 per cent at $57.32, while Brent Crude lost 2.52 per cent to stay at $66.94.
Crude oil followed yet another global sell-off after signals of an intensifying trade war came out of China.
“Waging a trade war against China, the U.S. risks losing the supply of materials that are vital to sustaining its technological strength,” China’s Xinhua news agency said in a commentary.
China is a dominant exporter of rare earths, and speculation had already started to swirl that the country could be using the rare earths trump card in the trade dispute.
“By making unilateral moves to contain technological development of other countries, the United States seems to have overlooked one fact: the international supply chain is so intertwined that no economy could thrive on its own. If necessary, China has plenty of cards to play,” Xinhua said.
The escalation of the trade dispute resulted in another big drop in oil prices on Wednesday as investors focused on the demand side of the oil market. The prospect of a protracted trade war between the world’s two largest economies has had investors and traders worried that global economic growth will slow down, dragging down global oil demand growth with it.