The West Texas Intermediate futures fell by more than 2% intraday to $54.11 per barrel, with the Brent futures also trading lower at around $58.88 per barrel.
The oil market was soft on Friday after Federal Reserve Chair Jerome Powell failed to come out strongly in support of aggressive interest-rate hikes in his speech at the annual symposium of central bankers at Jackson Hone, Wy. While Powell acknowledged that geopolitical factors such as the tariff tensions had created a "complex, turbulent picture," he noted the economy was in a "favorable place" with strong job creation and consumer spending.
The market interpreted that as a move in line with Powell's earlier comments in July that the 25 basis-point cut was a "mid-cycle adjustment" and not the beginning of a series of cuts to the Fed funds rate, disappointing investors who were looking for a slightly more dovish stance from the Fed.
"The markets are begging for a counterweight to headwinds from slowing global growth, the US-China trade war and a myriad of political flashpoints, such as Brexit," Ilya Spivak, senior currency strategist at DailyFX said. "Cycle-sensitive crude oil prices seem likely to face selling pressure in this scenario."
Meanwhile, President Trump, who was already disappointed by Powell's less dovish speech than expected, turned his ire on China, whose currency yuan depreciated to the lowest level in 11 years on Friday, undermining the benefit to the US of slapping import tariffs on hundreds of billions of dollars of imports.
Lashing out against retaliatory tariffs from China, President Trump said in a twitter message: "Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing..your companies HOME and making your products in the USA."
Such a notable escalation of trade row rhetoric pushed markets down across the board, including both WTI and Brent futures, with investors concerned about the impact of demand for oil if the world's two largest economies go down the path of undermining each other's economic interests.
Earlier this month, both the Organization for Petroleum Exporting Countries and International Energy Agency have cut their forecasts for growth in oil demand in 2019 due to the uncertainty created by the trade conflict between the world's two largest economies.
On Friday, data compiled by energy services firm Baker Hughes (BHGE) showed the number of oil rigs operating in the US slumped by 16 to 754 during the week that ended Aug. 23, the lowest level since January 2018. The combined oil and gas rig count in the US fell by 19 to 916 as gas rigs fell by three to 162.
In Canada, the number of oil rigs in operation fell by six to 95, and gas rigs were up by three to 44 during the week in review. As a result, the North American total slumped by 22 to 1,055 versus 1,273 a year ago, the data showed.
Meanwhile, the Energy Information Administration reported on Wednesday that crude stockpiles fell by 2.7 million barrels over a week to Aug. 16 - that's more than the 1.9 million-barrel slump expected in a Reuters' poll of analysts.
Price: 20.95, Change: -0.48, Percent Change: -2.22
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