US, WASHINGTON (ORDO NEWS) — The rapid rise in oil prices by almost 20% per week was replaced by a 5% drop on Friday after rising tensions in the rhetoric between the United States and China and the Chinese authorities’ insecurity in restoring economic growth after the pandemic.
Oil of the European standard Brent fell by $ 1.8, or 4.8%, to $ 34.3 per barrel by 14:00 Moscow time according to exchange data. American benchmark West Texas Intermediate (WTI) fell by almost $ 2, or 6%, to $ 31.92 per barrel.
At morning trading, oil prices in London and New York became cheaper – by $ 3. Oil began to get cheaper in the morning after the annual session of the All-China People’s Representative Assembly (NPC) opened in China on Friday, May 22, which was postponed for about two months due to an outbreak of coronavirus.
China, the second largest economy in the world after the United States, did not dare to set a target for economic growth. “I would like to note that we have not set a specific goal for economic growth this year,” said Li Keqiang, Prime Minister of the State Council of the People’s Republic of China. “This is due to the fact that our country will encounter some factors whose influence is difficult to predict.” He noted “significant uncertainty regarding the COVID-19 pandemic and the global economic and trade environment.”
Between the United States and China, tensions are growing in the trade standoff and the political freedom dispute in Hong Kong. China intends to introduce new legislation on national security in Hong Kong, which triggered a warning from US President Donald Trump.
Trump’s election campaign on China may be worse than the virus. Washington intends to remind Beijing of all its old grievances: currency fraud, a weak yuan, a trade deficit, 5G communications, Hong Kong status, and so on, according to economic analyst Grigory Beglaryan.
“Investors again have to face an increasing verbal war between the US and China,” said Reuters Stephen Brennock of PVM brokerage company. “Coronavirus has nullified a decade of global oil demand growth, and recovery will be slow,” he warns.
The oil market has not yet come out of the darkness. As Eugene Weinberg of Commerzbank said: “We believe that the latest oil price rally was excessive.”
The Organization of Petroleum Exporting Countries and its allies, known as OPEC +, uniting 23 countries, are cutting supplies by a record 9.7 million barrels per day from May 1 to support the market. They decided to join another 9 countries that had avoided earlier production cuts. In this case, the reduction could reach 20 million barrels.
The supply data indicate the start of confident implementation of the OPEC + agreement. The threat of oversaturation of the market and oil storage facilities is weakening. US oil inventories fell last week.
The price of oil in the markets fell 2-fold at the end of March 2020 after the termination of the previous OPEC + agreement. The price of Brent reached a 21-year low below $ 16 in April, and the price of contracts for the supply of American oil reached negative values. As the pandemic declines and fuel consumption in the world grows, oil has more than doubled in price, supported by OPEC + cuts.
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