Oil fell over 4% on Friday to below $35 a barrel on rising U.S.-China tensions and doubts about the pace of demand recovery from the coronavirus crisis, although it remained on course for a weekly gain.
China is set to impose new national security legislation on Hong Kong, prompting a warning from U.S. President Donald Trump. Beijing also failed to set an economic growth target as the pandemic hammers the world’s second-largest economy.
Brent crude dropped $1.50, or 4.2%, to $34.56 a barrel at 1445 GMT, after falling as low as $33.54. U.S. West Texas Intermediate (WTI) crude declined by 98 cents, or 2.9%, to $32.94.
“Investors are once again having to contend with an intensifying war of words between the U.S. and China,” said Stephen Brennock of broker PVM.
“The coronavirus has nullified a decade of global oil demand growth and the recovery will be slow.”
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 starting, Brent has since more than doubled and was on track for a fourth weekly gain.
“The oil market is not out of the woods yet,” said Eugen Weinberg of Commerzbank. “We regard the latest price rally on the oil market to be excessive.”
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.
Export figures suggest OPEC+ made a strong start. 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.
Traders will be keeping an eye on U.S. demand for the Memorial Day weekend, a time when fuel use usually rises.