UPDATE 7-Oil plummets, on track for biggest weekly drop in 2019

* U.S.-China trade tension weighs on prices
* PMI seen weaker than expected, indicating slowdownU.S. oil
output, stock & drilling: https://tmsnrt.rs/2DwTUBQ
* Middle East tensions keep markets on edge

(Updates with settlement prices)
By Jessica Resnick-Ault
NEW YORK, May 23 (Reuters) - Oil prices plunged on Thursday,
losing about 5% as trade tensions dampened the demand outlook,
putting the crude benchmarks on course for their biggest daily
and weekly falls in six months.
Oil coursed downward with other global markets as concerns
grew that the China-U.S. trade conflict was fast turning into a
technology cold war between the world's two largest economies.
While the trade war is the main cloud over economic growth
and demand predictions, market participants also pointed to
weakening U.S. data and overfull U.S. crude stockpiles.
"Again, we're seeing the effect of worries about the trade
issue on demand," said Gene McGillian, vice president at
Tradition Energy in Stamford, Connecticut. Funds and money
managers who had built up long positions are "heading to the
exits" as trade concerns dim the demand outlook, he said.
Brent crude futures LCOc1 , the international benchmark,
settled down $3.23, or 4.6%, at $67.76 a barrel.
U.S. West Texas Intermediate (WTI) crude futures CLc1
dropped $3.51, or 5.7%, to $57.91 a barrel. Earlier, the
contract touched $57.33 a barrel, the lowest since March 13.
That was a second consecutive daily decline for the
benchmarks. WTI fell 2.5% on Wednesday after government data
showed U.S. crude inventories rose last week, hitting their
highest levels since July 2017. Economic health indicators for the United States, Europe and
Japan showed less robust growth than expected.
Data firm IHS Markit said its U.S. manufacturing PMI
declined to a reading of 50.6 in early May, marking the lowest
level since September 2009, from 52.6 in April. A reading above
50 indicates growth in the manufacturing sector, which accounts
for about 12% of the U.S. economy.
The survey showed broad weakness, with a measure of new
orders received by factories dropping for the first time since
August 2009. The firm's survey for Euro zone business growth accelerated
less than expected this month. Additionally, U.S.-Iran tensions are decreasing, some
analysts said.
"The administration seems to be tamping down the president's
rhetoric on Iran," said John Kilduff, a partner at Again Capital
in New York.
The oil market has built in risk premium related to U.S.
sanctions on Iran, and that risk is now seen decreasing, he
said.
Countering these bearish factors are ongoing supply cuts led
by the Organization of the Petroleum Exporting Countries (OPEC).
French bank BNP Paribas said high inventories meant that
OPEC would likely keep its voluntary supply cuts in place beyond
their end-June deadline.
Global geopolitical risk was still sufficient to provide a
floor for oil prices, said Again's Kilduff. Drone attacks on
Saudi Arabia earlier this week called attention to ongoing
Middle East turmoil that may prevent oil prices from pulling
back to February lows, Kilduff said.

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GRAPHIC: U.S. oil drilling, production & storage levels https://tmsnrt.rs/2DxgF8W
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