By Adedapo Adesanya
Crude oil prices will be swayed largely this week by concerns over rising tensions between the United States and China over plans to of the latter to impose security laws on Hong Kong and the possibility of sanctions from the US.
Last week, prices of the major futures; Brent Crude and West Texas Intermediate (WTI), finished higher for the fourth straight week.
The WTI crude oil settled higher at $33.25 after garnering $3.73 or 12.64 percent, while the Brent crude oil finished rose by $2.86 or 8.02 percent to $35.66.
This was fueled by positive supply data and an optimistic outlook for demand as countries have begun to ease coronavirus related lockdowns and restrictions.
However, renewed concerns over US China relations will largely take a toll on prices this week. This was seen on Friday, when a riot broke out in Hong Kong, with police firing tear gas on demonstrators, who are calling for an independence from China.
The fresh protests came after China imposed a new national security law on Hong Kong after months of anti-government protests in the Chinese-ruled city.
As a result, tensions that calmed for a while 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 exchanges.
Adding to uncertainties, China refrained from setting a 2020 GDP growth target and pledged to step up spending and financing to support its economy, the first time that the Asian country did not set a gross domestic product (GDP) goal since 1990 when the government started to publish such targets.
For market hopefuls, signs like the largest importer, China’s oil demand which has climbed back to about 13 million barrels per day, may improve market sentiment.
With China’s demand back to about 90 percent of pre-pandemic levels, oil traders are clearly holding out hopes of a quick rebound in other places.
Also, the fact that supply is dropping may also tilt in favour of the market. Compliance is being achieved with the OPEC+ production cuts which take off 10 percent of usual output, while the largest producer, the US has taken more than 2.2 million barrels per day of US oil production.
This week, if the tensions between the two heavyweights continue to worsen over the near-term, then this could raise enough uncertainty to encourage crude oil traders to profits and take to the sidelines on fresh worries over future demand.
As at the time of filing this report on Monday morning, the market was pointing north, with the Brent Crude up by 0.28 percent to trade at $35.23 per barrel, while the WTI was up 0.84 percent to sell at $33.54 per barrel.
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