Global oil prices entered bear market territory Wednesday as investors continue to reprice assets linked to world economic growth as the U.S.-China trade dispute threatens to evolve into a more-damaging currency war.

Brent crude slipped below the $56 per barrel mark in overnight trading, marking a 20% decline for the global benchmark from its April peak of $74.04 per barrel, as China allowed its yuan to trade through the $7 mark against the U.S. dollar for a third consecutive session despite being labeled as a currency manipulator by the Treasury Department earlier this week. Energy Department data also showing domestic crude stockpiles grew by 2.39 million barrels last week added to the downside pressure. 

Oil market sentiment was further damaged by data from Germany that showed June industrial output in Europe's biggest economy fell 5.2% from last year, the steepest decline since 2009 and a reading that matches the weakest global factory activity from the world's major economies since 2012.

"Clearly, the current weakness in the market reflects concerns over demand growth for the remainder of this year, as well as 2020, particularly given the current macro environment, and a ratcheting up in the trade war," said ING'S head of commodities strategy Warren Patterson. "There is a large degree of scepticism around demand growth forecasts moving forward. The IEA is currently estimating that demand will grow by (1.8 million barrels per day) over 2H19, this is up from around 300 million barrels per day in 1Q19 and 800 million barrels per day in 2Q19."

"Therefore given the current macro climate, this number might be a bit too ambitious for the remainder of the year," he noted. "Furthermore, the longer the trade war drags on, the more downside risk there is around the demand growth number of 1.4 million barrels per days in 2020."

Brent crude contracts for October delivery were seen $2.81 lower from their Tuesday close in New York trading and changing hands at $56.35 per barrel while WTI contracts for September, which are more tightly linked to U.S. gas prices, were marked $2.75 lower at $50.82 per barrel.

Last month, the International Energy Agency predicted that record-high U.S production rates, which are set to top 13 million barrels a day next year, will offset both weakening global demand and OPEC output cuts, pushing global oil stocks 136 million barrels higher by the first quarter of 2020.

"The picture will evolve as 2019 progresses, but in the near term the main area of focus remains demand growth," the IEA said in its July Oil Report. "While the GDP estimates behind our forecast are unchanged from last month's Report, there are indications of deteriorating trade and manufacturing activity."

However, the IEA has also said that global demand should rise by 1.4 million barrels a day next year, and top 100 million barrels a day for the first time ever, as measures in some emerging market economies, such as Argentina, Brazil, India and Indonesia, to allow customers to cope with higher prices kick-in.