"The market is anxious about the broader trade war escalation, Donald Trump and his Twitter finger and indications sliding demand growth will impact the global economy", said Michael Tran, commodity strategist at RBC Capital Markets.
Bearish news for oil then, yet it has managed to stave off heavier declines due to supply side factors. China imported 9.24 million barrels per day in 2018, and much of that is still sent to storage.
"Trade war rhetoric will continue to guide markets, but the comments from Saudi Arabia could lead to unprecedented action to stabilize prices", Esparza said. Those declines were partially offset by the Lower 48 States onshore region, which is mostly tight oil production, where supply rose by more than 0.1 million b/d.
"The U.S. dollar is losing some steam and easing some of the pressure on oil prices", said Alfonso Esparza, a Toronto-based senior market analyst at Oanda.
Brent crude futures were down 4.4% midday Wednesday, at $56.35 USA a barrel, setting a seven-month low. Oil struggled as doubts lingered over demand for energy, an apprehension closely connected to Washington's friction with China and other trade partners.
Reports that Saudi Arabia, the world's biggest oil exporter, had called other producers to discuss the slide in crude prices might also have supported the market, he said. As of Wednesday afternoon, West Texas Intermediate Crude was trading at $51.17 per barrel - down more than 4.5 percent, while Brent Crude was trading around $56.35 per barrel. The forecast of stable crude oil prices is the result of EIA's expectations of a relatively balanced global oil market.
Analysts said the news gave investors a timely relief amid broad fears over weakening global energy demand.
Meanwhile, U.A.E. Energy Minster Suhail Al-Mazrouei said on Twitter that "oil market fundamentals are good" and prices are undergoing a "temporary over-reaction, which is driven by speculation".
Brent has plunged more than 12% since last week as global equity markets went into a tailspin after U.S. President Donald Trump said he would slap a 10% tariff on a further $300 billion in Chinese imports from September 1. EIA forecasts global oil inventories will increase by 0.1 million barrels per day (b/d) in 2019 and 0.3 million b/d in 2020. Still, U.S. stock indexes tumbled more.
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