Brent crude futures sank $3.77, or 5.3%, to $67.22 per barrel around 1:15 p.m. ET (1715 GMT). The international benchmark for oil prices hit a nearly two-month low earlier in the session.
U.S. West Texas Intermediate crude futures tumbled $3.87, or 6.3% to $57.55 per barrel, after falling 2.7% on Wednesday. WTI dropped to the lowest level in more than two months on Thursday.
“The $60 level is a critical support point,” said John Kilduff, founding partner at energy hedge fund Again Capital.
“After $60, really it’s right down around $58 or so. Theoretically, if this thing really becomes a washout, $52 is the downside objective,” he said, cautioning that the move would not happen overnight.
Crude futures fell with the stock market as the ongoing U.S.-China trade dispute entered a new phase. A wave of companies is suspending business with Huawei after the U.S. blacklisted the Chinese telecom giant.
Washington and Beijing are set to increase tariffs on hundreds of billions of dollars of one another’s goods, raising concerns about a global economic slowdown and weaker demand for oil.
U.S. manufacturing activity grew at its slowest pace since September 2009 this month, according to IHS Markit.
Meanwhile, data released overnight showed Japanese manufacturing activity fell into contraction in May. Manufacturing activity for the European Union and Germany also came in below expectations.
Economic forecasting firm Oxford Economics on Thursday warned that weak crude demand appears to be spreading from developed nations to developing economies.
“One particular surprise is that China was weak in March, with diesel demand acting as a significant drag,” Oxford said in a research note. “We are currently forecasting 4% oil demand growth for this year, but this assumes a significant acceleration in the remainder of 2019.”
“You’ve got the U.S.-China trade war just doing its damage across the board,” Kilduff said. “Crude was ready to take a hit on it all along except for the geopolitical tensions in the Middle East.”
Politico reported Thursday that Democratic Sen. Dianne Feinstein met with Iranian Foreign Minister Javad Zarif a few weeks ago during a dinner arranged in consultation with the State Department.
The news follows President Donald Trump’s meetings last week with Switzerland’s president, and Secretary of State Mike Pompeo’s phone call with Oman. Both countries have served as intermediaries between the U.S. and Iran, sparking speculation that the White House is trying arrange negotiations.
“The president has made clear that at the right time negotiations are important,” Pompeo told CNBC’s “Squawk Box” on Thursday. “What the president has said is that he’s prepared at the right time, when the Iranians conclude that it’s in their best interest to negotiate, we stand ready to take their call.”
Pompeo said the Trump administration has taken measures to prevent oil prices from spiking while the U.S. attempts to drive Iran’s crude exports to zero.
Still, OPEC members and major oil-producing nations signaled this past weekend that they will likely keep a lid on production throughout 2019, even as Trump calls on them to hike output and cut fuel costs.
Also weighing on oil prices, U.S. crude stockpiles rose by 4.7 million barrels last week, while gasoline inventories jumped by 3.7 million barrels as refinery activity fell.
— CNBC’s Fred Imbert contributed to this report.