Unfortunately for shareholders of energy producers such as Oil Search Limited (ASX: OSH), Santos Ltd (ASX: STO), and Woodside Petroleum Limited (ASX: WPL), their shares look set to finish the week deep in the red after oil prices crashed lower overnight.
According to Bloomberg, the WTI crude oil price sank 8% to US$53.95 a barrel and the Brent crude oil price tumbled 6.15% to US$61.05 a barrel. This was the biggest daily decline in four years.
Why did oil prices crash lower?
Crude oil prices plunged on Thursday amid concerns that the global economy could weaken further after President Donald Trump brought the United States' tariff ceasefire with China to a very abrupt end.
Despite the fact that the two countries are continuing their trade talks, President Trump announced that additional 10% tariffs would be added to US$300 billion of Chinese goods at the start of September.
Trump said through a series of tweets: "Our representatives have just returned from China where they had constructive talks having to do with a future Trade Deal. We thought we had a deal with China three months ago, but sadly, China decided to re-negotiate the deal prior to signing."
"More recently, China agreed to buy agricultural product from the U.S. in large quantities, but did not do so. Additionally, my friend President Xi said that he would stop the sale of Fentanyl to the United States – this never happened, and many Americans continue to die!"
"Trade talks are continuing, and during the talks the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country. This does not include the 250 Billion Dollars already Tariffed at 25%."
He concluded: "We look forward to continuing our positive dialogue with China on a comprehensive Trade Deal, and feel that the future between our two countries will be a very bright one!"
Whilst President sounds optimistic on a deal being reached, the same certainly cannot be said for the market.
John Kilduff from Again Capital told CNBC: "The oil market has been the highest hit asset around from the trade war and this only exacerbates the situation. The oil markets didn't get help from the stance the Federal Reserve took yesterday and then got hurt by the president's announcement."
