Oil prices sank on Thursday following weak U.S. economic data and after a tweet from U.S. President Donald Trump suggesting the nation should delay its November presidential election.
Investors sold riskier assets following Trump's tweet about delaying the vote. The date of the U.S. election is enshrined in the U.S. Constitution, but Trump's remarks were viewed as an attack on the integrity of the coming election, worrying investors.
Oil markets recovered from their lowest levels of the selloff. West Texas Intermediate crude futures settled $1.35, or 3.27%, lower after falling more than 5% earlier in the session.
Brent crude futures, which expire on Friday, settled 81 cents lower at $42.94 per barrel.
"We have the potential for serious political uncertainty in the U.S. if election dates are challenged," said John Kilduff, partner at Again Capital in New York.
Meanwhile, in a sign of the devastating impact of the coronavirus on the United States, the world's biggest oil consumer, the country's economy contracted at its steepest pace since the Great Depression in the second quarter.
U.S. gross domestic product collapsed at a 32.9% annualised rate, the deepest decline in output since the government started keeping records in 1947. In addition, weekly jobless claims rose, a signal that the worsening outbreaks across wide swathes of the United States are taking a further toll on the economy.
"Trump's tweet was the last thing the market needed as we digest horrific U.S. gross domestic product figures again," Kilduff said.
Deaths from COVID-19 have now topped 150,000 in the United States, while Brazil, with the world's second-worst outbreak, set daily records of confirmed cases and deaths. New infections in Australia hit a record on Thursday.
"The recent resurgence of the coronavirus is an ominous sign that the upside is limited in the immediate future," Tamas Varga of oil brokerage PVM said.
The potential threat to a recovery in oil demand comes as the Organization of the Petroleum Exporting Countries (OPEC) and its allies, together known as OPEC+, are set to step up output in August, adding about 1.5 million barrels per day to global supply.
Both benchmark contracts rose on Wednesday after the U.S. Energy Information Administration (EIA) reported the largest one-week fall in crude stocks since December.