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Oil prices dropped on Wednesday, as the market digested a sudden rise in US crude supplies last week and as Asia’s sluggish economic growth kept prices under pressure, amid an ongoing trade spat between the US and China.

International benchmark Brent crude futures for the October contract fell 1.1 percent to $73.34 per barrel, while Crude Oil WTI futures for September delivery declined 1 percent to $68.03 per barrel.

For this month, both benchmarks have marked their biggest monthly losses since July 2016. Brent slipped more than 6 percent this month, while Crude Oil WTI futures have shed around 7 percent.

US Crude Stockpiles Rise to 5.6 million in July

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Pulling prices down was the data from the American Petroleum Institute (API) that showed an unexpected build up in US crude stockpiles last week.

For the week ended July 27, domestic oil inventories increased 5.6 million barrels, defying forecast of a 2.8 million barrel drop.

Chief Market Strategist Greg McKenna said the API data pulled the market lower, although it already had been under pressure after Brent failed to hold the push back up into the old one-year uptrend it broke out in the previous months.

Brent may decline to as low as $71 per barrel before being supported, while Crude Oil WTI has a $2 to $4 fall as a strong possibility over the next week or so, Mckenna added.

With API reporting a huge supply rise, the focus will now be on the US Energy Information Administration’s (EIA) official data later this day. Analysts expect the EIA to show a drop of 2.4 million barrels in crude supplies.  

Also adding further pressure on prices was the possibility of the supply disruption in the Bab al-Mandeb Strait in the Red Sea coming to an end, as Yemen’s Houthi militia announced that it was willing to temporarily stop its attacks in the Red Sea to support peace efforts.

Saudi Arabia had to make the unexpected decision last week to suspend oil shipments via the Bab al-Mandeb Strait after the Houthis made an assault on two Saudi oil tankers.

Prices in the physical market were also seen going down in the physical market, where top oil exporter Saudi Arabia is expected to slash prices for all crude grades that are bound for Asia in August, according to several market participants.

Asia Economy Slows Down in July on US-China Trade Dispute

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Concerns over slowing economic growth due to the US-China trade dispute was also weighing down markets.

Following the US and China’s implementation of tariffs on $34 billion worth of each other’s products, the US is expected to introduce another round of tariffs on $16 billion worth of Chinese goods in August.

In addition, trade tensions between the world’s two largest economies may escalate further, as the White House is preparing to propose 25 percent tariffs on another $200 billion of imports, which was 10 percent more than what was originally planned.

With the two countries at odds, the economic growth is suffering the consequences. Manufacturing activity across Asia slowed in July, further raising concerns about the region’s economic outlook as the conflict between the US and China left Asia’s trading partners on edge.

The repercussions brought about by the conflict to the economy are already showing in the container market, in which most of the finished products are imported and exported.

The Harpex container index has slipped 10 percent from its 2011 highs in June to a last close of 613, its lowest level since March.

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