The U.S. oil benchmark tumbled nearly 8 percent on Thursday in its biggest one-day drop in four and a half years after U.S. President Donald Trump rekindled fears of significant slowdown in economies and oil demand growth by announcing he would impose tariffs on US$300 billion worth of Chinese imports.

On Wednesday, WTI Crude traded at $58.58 a barrel at close, while on Thursday, the U.S. benchmark crashed by as much as 7.9 percent, or by $4.63 a barrel to close at $53.95. Oil prices took a heavy hit after President Trump said that the U.S.-China trade talks—after no-breakthrough negotiations this week —would continue in September, while 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.”

Thursday’s oil price collapse was the largest daily drop in WTI Crude prices since February 2015, when U.S. shale production was growing and OPEC was fighting for market share and pumping at will, trying to drive the U.S. shale patch out of its breakeven range while flooding the market with oil at the same time.

Thursday’s price plunge came after five consecutive days of oil price gains, helped by simmering tensions in the Middle East and reports of a solid decline in U.S. commercial oil inventories. The EIA said on Wednesday that U.S. crude oil inventories had shed 8.5 million barrels in the week to July 26, to a total 436.5 million barrels, which was at the five-year average for this time of the year. Related: The First Country To Abandon IMO 2020

Later on Wednesday and early on Thursday, oil prices dropped as the Fed delivered the widely expected rate cut, but Fed Chair Jerome Powell said that “it’s not the beginning of a long series of rate cuts,” dampening hopes of a long period of monetary easing.

Then came President Trump’s somewhat surprise tweet about new tariffs on China, and the markets took a beating. Oil prices tanked and the U.S. stock market reversed big gains to big losses.

Early on Friday, oil prices were beginning to recover from Thursday’s plunge, and as of 01:00 a.m. EDT, WTI Crude was up 2.04 percent at $55.05, and Brent Crude traded up 2.48 percent at $62.00.

By Tsvetana Paraskova for Oilprice.com

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