New US-China Tensions over Hong Kong Drag Oil Prices Down
By Adedapo Adesanya
Oil prices pointed south on Friday as renewed tensions between the United States and China proved unfavourable to the recovering market.
China plans to impose a new national security law on Hong Kong after months of anti-government protests in the territory. The move has sparked concerns from various quarter as the law will give Beijing more control over Hong Kong and the US, known for its history against the idea, has kicked against it.
As a result, Brent crude futures fell 93 cents or 2.58 percent to $35.13 per barrel, while the US West Texas Intermediate (WTI) crude fell 36 cents or 1.06 percent to $33.56 per barrel.
Tensions between Beijing and Washington have risen in recent days, over issues such as the coronavirus pandemic as well as a bill that was passed which could force Chinese firms to delist on US stock exchanges.
Adding to uncertainties, China refrained from setting a 2020 gross domestic product (GDP) growth target and pledged to step up spending and financing to support its economy.
This is the first time that the Asian country did not set a GDP goal since 1990 when the government started to publish such targets.
The move by China to impose a new security law on Hong Kong further strained its already weakening ties with the US.
This is coming at a time that global oil demand is lifting itself after slumping by about 30 percent as the coronavirus pandemic brought about restrictions to movement across the world and growing inventories globally.
And with this week being one of the best weeks for oil with efforts by the Organization of the Petroleum Exporting Countries and allies, known as OPEC+ to reduce supply by a record 9.7 million barrels per day from May 1 to support the market bearing forth good news, this latest development may prove very crucial as the United States warned that it would react strongly.
This is proving analysts right that the market is still not yet balanced despite a sign of glut easing as US crude inventories fell last week.
However, fuel demand is rising and some airlines are planning for a return of European travel and this was very good for prices despite the new round of problems. WTI crude finished 12.6 percent higher and Brent rose 8.1 percent this week with both benchmarks marking their fourth weekly advance in a row.
