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Brent crude futures slumped more than 7% on Thursday after the United States threatened more tariffs on China. Traders concluded that the risk of a recession, which would cut oil consumption, had increased.
The move was statistically rare, equal to more than three standard deviations of daily moves since 1990.
Higher recession odds reduce expected oil demand, pulling crude lower and weighing on biofuel feedstock economics. Escalating tariffs also threaten U.S. farm exports to China, a bearish factor for soybeans.
reuters.comJohn KempAug 2, 2019After 56 past bearish trade events, BRENT moved a median -5.6% over 5 sessions (20% higher; middle half -9.0% to -1.7%), and -4.5% over 20.
After 80 past bearish trade events, WTI moved a median -2.2% over 5 sessions (30% higher; middle half -6.9% to +0.8%), and -1.5% over 20.
After 803 past bearish trade events, SOY moved a median +0.0% over 5 sessions (51% higher; middle half -1.7% to +1.7%), and +0.9% over 20.
Moves of each commodity's benchmark from the last close before the event. Historical reads pool past events of the same kind; they describe what happened, not what will. Not investment advice.
Explains the statistically rare Brent drop as traders priced higher recession risk and lower oil consumption after the tariff threat.
