Oil trims record monthly gain with mounting U.S.-China tension
By Bloomberg |
May 29, 2020, 7 a.m. |
Oil fell as crude was swept up in the broader negative sentiment around deteriorating U.S.-China relations and signs that the market’s demand recovery will be patchy.
Futures in New York declined 2.5 per cent on Friday, but were still on course for the biggest monthly gain in data going back almost four decades as massive supply cuts tighten the market. There were concerns for investors, however, with U.S. President Donald Trump preparing to announce new policies on China after Beijing escalated its crackdown on Hong Kong, sending equities lower.
While Asian refiners heralded a rebound in consumption by snapping up distressed crude cargoes this week, the picture worldwide is far from uniform. In the U.S., virus cases continue to rise and gasoline demand slumped over the key Memorial Day holiday. Diesel markets in America and Europe are also flagging weakness, underscoring the market’s long road to recovery.
“Considering that geopolitical tensions between the U.S. and China over Hong Kong have a good chance of ratcheting higher, the prevalent optimism can easily reverse, sending oil prices lower again, which is what is happening today,” said Harry Tchilinguirian, an oil strategist at BNP Paribas SA.
West Texas Intermediate crude for July delivery fell 84 cents to $32.87/bbl as of 12:55 p.m. London time
Prices are up 74 per cent in May, the biggest gain in data compiled by Bloomberggoing back to 1983
Brent for July, which expires Friday, fell 2.1 per cent to $34.56/bbl
China’s move to crack down on Hong Kong and Trump’s threats to retaliate have further escalated tensions between the world’s two largest economies. The countries have already traded insults and blame for the coronavirus pandemic, which began in the Chinese province of Hubei but has killed at least 100,000 Americans, far more deaths than China has reported.
© 2020 Bloomberg L.P.