LONDON – Oil fell over 5% on Friday towards $34 a barrel as tensions rose between the United States and China, and doubts grew about the pace of demand recovery from the coronavirus crisis
China is set to impose new national security legislation on Hong Kong, drawing a warning from U.S. President Donald Trump. Beijing also failed to set an economic growth target as the pandemic hammers the word’s second-largest economy.
Brent crude dropped $1.96, or 5.4%, to $34.10 a barrel at 0833 GMT, after falling to as low as $33.54. U.S. West Texas Intermediate (WTI) crude declined by $2.41, or 7.1%, to $31.51.
“Investors are once again having to contend with an intensifying war of words between the U.S. and China,” said Stephen Brennock of oil broker PVM.
“The coronavirus has nullified a decade of global oil demand growth and the recovery will be slow going forward.”
Oil has slumped in 2020, with Brent hitting a 21-year low below $16 in April and U.S. crude falling below zero. With fuel use rising and supply cuts kicking in, Brent has since more than doubled and was still on track for a fourth weekly gain.
The Organization of the Petroleum Exporting Countries, Russia and other allies, known as OPEC+, agreed to tackle the supply glut with a deal to reduce supply by a record 9.7 million barrels per day from May 1.
Export figures suggest OPEC+ made strong start in complying with the deal. In a sign of the glut easing. U.S. crude inventories fell last week.
There are signs of gasoline demand rising and some airlines are planning for s return of European travel, meaning more jet fuel demand.
Traders will be keeping an eye on U.S. demand readings for the upcoming Memorial Day weekend, a time when consumption usually rises.