Oil edged lower as an escalating war of words between the US and China added to caution over the prospects for a global recovery in demand.
Futures in New York lost 0.4% in Asian trading after falling 2% on Friday. China warned that some in the US were pushing the countries toward a new Cold War, stoking concerns that deteriorating relations between the superpowers could complicate the market’s recovery from a historic demand crash. Beijing last week abandoned its decades-long practice of setting an annual target for economic growth due to uncertainty caused by the coronavirus.
However, there are signs the oil market is positioning itself for a recovery. US shale drillers have cut the number of active rigs to the lowest level since 2009, trimming output further. This comes as OPEC+ slashes daily output by almost 10 million barrels in an effort to reduce a glut.
Oil has surged about 75% this month as pockets of demand return in China and India after the easing of lockdown restrictions, and as US crude inventories start to decline. However, the recovery is expected to be long and uncertain, with the risk of a second wave infections possibly complicating a rebound.
The US should give up its “wishful thinking” of changing China, Foreign Minister Wang Yi said Sunday during his annual news briefing on the sidelines of National People’s Congress meetings in Beijing. He also warned America not to cross China’s “red line” on Taiwan.
While fuel consumption climbs in some nations as lockdown restrictions ease, the cheapest US gasoline in nearly two decades won’t be enough to entice nervous American’s to hit the road for Memorial Day weekend. The uncertainty around travel is so great due to the virus that AAA is not releasing a forecast for the first time in 20 years.
Big oil annual general meetings in the US and Europe this week should shed light on how heavily producers have been hit by lockdowns, with Total SA, BP Plc, Exxon Mobil Corp. and Chevron Corp. among those fronting shareholders. Meanwhile, Russian President Vladimir Putin has given his government until June 15 to come up with a plan to support the country’s oil industry.
