Picture: 123RF/PAVEL IGNATOV
Picture: 123RF/PAVEL IGNATOV

London — Oil fell more than 5% on Friday, heading towards $34 a barrel as tensions rose between the US and China, and doubts grew about the pace of demand recovery from the coronavirus crisis.

China is set to impose new national security legislation on Hong Kong, drawing a warning from US President Donald Trump. Beijing also failed to set an economic growth target as the pandemic hammers the word’s second-largest economy.

Brent crude dropped $1.96, or 5.4%, to $34.10 a barrel at 8.33am GMT, after falling to as low as $33.54. US West Texas Intermediate (WTI) crude declined by $2.41, or 7.1%, to $31.51.

“Investors are once again having to contend with an intensifying war of words between the US and China,” said Stephen Brennock of oil broker PVM. “The coronavirus has nullified a decade of global oil demand growth and the recovery will be slow.”

Oil has slumped in 2020, with Brent hitting a 21-year low below $16 in April and US crude falling below zero. With fuel use rising and supply cuts kicking in, Brent has since more than doubled and was still on track for a fourth weekly gain.

Oil cartel Opec and other allies (Opec+), agreed to tackle the supply glut with a deal to reduce supply by a record 9.7-million barrels per day from May 1.

Export figures suggest Opec+ made a strong start in complying with the deal. In a sign of the glut easing. US crude inventories fell last week.

There are signs of petrol demand rising and some airlines are planning for a return of European travel, meaning more jet fuel demand.

Traders will be keeping an eye on US demand readings for the upcoming Memorial Day weekend, a time when consumption usually rises.

Reuters