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Oil Trims Record Monthly Gain With Mounting U.S.-China Tension


By Sharon Cho and Alex Longley

(Bloomberg) Oil fell as crude was swept up in the broader negative sentiment around deteriorating U.S.-China relations and signs that the market’s demand recovery will be patchy.Futures in New York declined 2.5% on Friday, but were still on course for the biggest monthly gain in data going back almost four decades as massive supply cuts tighten the market. There were concerns for investors, however, with U.S. President Donald Trump preparing to announce new policies on China after Beijing escalated its crackdown on Hong Kong, sending equities lower.

While Asian refiners heralded a rebound in consumption by snapping up distressed crude cargoes this week, the picture worldwide is far from uniform. In the U.S., virus cases continue to rise and gasoline demand slumped over the key Memorial Day holiday. Diesel markets in America and Europe are also flagging weakness, underscoring the market’s long road to recovery.

Oil has had its best and worst month this year

“Considering that geopolitical tensions between the U.S. and China over Hong Kong have a good chance of ratcheting higher, the prevalent optimism can easily reverse, sending oil prices lower again, which is what is happening today,” said Harry Tchilinguirian, an oil strategist at BNP Paribas SA.

See also: Investors Piling Into Oil Are Ignoring Warnings on U.S. Demand

Prices
  • West Texas Intermediate crude for July delivery fell 84 cents to $32.87 a barrel as of 12:55 p.m. London time
    • Prices are up 74% in May, the biggest gain in data compiled by Bloomberg going back to 1983
  • Brent for July, which expires Friday, fell 2.1% to $34.56 a barrel

China’s move to crack down on Hong Kong and Trump’s threats to retaliate have further escalated tensions between the world’s two largest economies. The countries have already traded insults and blame for the coronavirus pandemic, which began in the Chinese province of Hubei but has killed at least 100,000 Americans, far more deaths than China has reported.

More on the oil market
  • As the fallout from crude’s historic plunge continues, the Securities and Exchange Commission and the Commodity Futures Trading Commission have both opened probes into the $4.64 billion United States Oil Fund ETF.
  • Abu Dhabi National Oil Co. will reduce crude production in line with the OPEC+ agreement and government directives, according to a company notice to buyers. Adnoc agreed to cut shipments of all crude grades by 5% for July.
  • Venezuela has grown increasingly dependent on one little-known trading firm in Mexico to help sell its crude abroad as the country faces U.S. sanctions starving it of oil profits in a campaign to oust President Nicolas Maduro.


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