Oil Prices Rise Amidst Fears of Escalating US-China Spat
By Adedapo Adesanya
Oil prices rose marginally on Monday despite concerns over rising tensions between the United States and China in a session that didn’t trade much due to the Eid-el-Fitr holiday.
There were expectations over China’s plans to impose security laws on Hong Kong and the possibility of sanctions from the United States, which has always kicked against it.
Oil prices have risen sharply in recent weeks as an easing of coronavirus restrictions has led to increased demand, but the tensions between the United States and China have been pegged to sway the market.
In the short trading on Monday, Brent closed up 40 cents or 1.14 percent at $35.53 per barrel, while the US oil, the West Texas Intermediate (WTI) crude, was up by 47 cents or 1.41 percent at $33.72 per barrel.
Both futures have risen for the past four weeks, although prices are still down around 45 percent so far this year with declines in global oil production and expectations for more have pushed prices of the commodity higher.
Meanwhile, improvements on both the demand and supply side of the equation are also helping prices. Data showed that people are starting to hit the road again, while producers around the globe who cut output at record rates in an effort to prop up prices are in compliance with the agreement.
At the beginning of the month, OPEC and its oil-producing allies started taking 9.7 million barrels per day of production offline, after agreeing to the deepest production cut in history during meetings held in April.
Then, earlier in May, Saudi Arabia said that beginning June 1, it would voluntarily cut an additional 1 million barrels per day on top of its portion of the cuts agreed to by OPEC+. Kuwait and the United Arab Emirates (UAE) were among the other cartel members that followed suit and said they would also exercise additional cuts.
Norway, Canada and the U.S. are among the other nations that also announced cutting production, bringing cuts up to 15 million barrels per day in total.
Now with ties between the US and China taking a terrible turn since the outbreak of the new coronavirus, President Donald Trump and President Xi Jinping have had spat at each other over the outbreak, including accusations of cover-ups and lack of transparency.
For political reasons, the leadership of each country is blaming the other for the coronavirus pandemic. The Chinese Foreign Minister, Mr Wang Yi, warned that the US leaders were potentially pushing towards a new cold war, which is having a negative impact on investors.
Clashes between the superpowers have included Hong Kong, human rights, trade and US support for Chinese-claimed Taiwan, and and this may further help depress prices that are making recovery.