Oil drops 4% on China-U.S. tensions, energy demand doubts
Oil prices tumbled about 4% on Friday on rising U.S.-China tensions and doubts about how quickly fuel demand would recover from the coronavirus crisis.
Fuel demand plummeted as the coronavirus pandemic caused governments to impose restrictions on movement and businesses closed their doors.
Oil has rallied in recent days on as activity starts to resume, but prices dropped after China said on Friday it would not publish an annual growth target for the first time. The nation also pledged more government spending as the pandemic kept hammering the world’s second-biggest economy.
“The coronavirus has nullified a decade of global oil demand growth and the recovery will be slow,” said Stephen Brennock of broker PVM.
Brent crude futures fell $1.53, or 4.2%, to $34.53 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell $1.20, or 3.5%, to $32.72 a barrel.
China is set to impose new national security legislation on Hong Kong after last year’s pro-democracy unrest, a Chinese official said on Thursday, drawing a warning from President Donald Trump that Washington would react “very strongly” against the attempt to gain more control over the city.
Brent and U.S. crude were set for a 6% and 11% weekly gain, respectively. But some said the gains this week may have come too far, too fast.
“A second wave (of the coronavirus) is not such a remote possibility and a new round of lockdowns could send prices back to much lower levels very quickly, and the market knows it,” said Rystad Energy senior oil markets analyst Paola Rodriguez Masiu.
Oil prices have plummeted more than 40% so far in 2020, rebounding in part due to efforts by OPEC+ to reduce supply. The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, are reducing supply by a record 9.7 million barrels per day from May 1 to support the market.
In a sign of the glut easing, U.S. crude inventories fell last week.
Gasoline demand is rising and some airlines are planning for a return of European travel.