Oil prices have tumbled about 2 per cent on rising US-China tensions and doubts about how quickly fuel demand would recover from the coronavirus crisis.
Fuel demand plummeted in recent months as the pandemic caused governments to impose restrictions on movement and businesses closed their doors. Oil has rallied in recent days as activity started to resume.
But prices dropped after China said on Friday it would not publish an annual growth target for the first time. Beijing also pledged more government spending as the pandemic kept hammering the 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 93 cents, or 2.6 per cent, to settle at $US35.13 a barrel. US West Texas Intermediate (WTI) crude ended 67 cents, or 2 per cent, lower at $US33.25 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 US President Donald Trump that Washington would react “very strongly.”
For the week, Brent and WTI gained 8 per cent and 13 per cent, respectively, but some said they 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 per cent so far in 2020. The recent rebound was due in part to efforts by the Organisation of the Petroleum Exporting Countries and allies to reduce supply. OPEC+ is reducing supply by a record 9.7 million barrels per day from May 1.
The US rig count, an indicator of future output, fell by 21 to a record low 318 this week, according to energy services firm Baker Hughes’ data going back to 1940.
In a sign of the glut easing, US crude inventories fell last week.
Money managers raised their net long US crude futures and options positions in the week to May 19 by 23,229 contracts to 380,211, the US Commodity Futures Trading Commission (CFTC) said on Friday.