Oil is down on the day but set for a record monthly gain
Weak US fuel demand, fears of a second wave of coronavirus cases in South Korea, and US-China tensions dragged Brent and WTI sharply lower
London — Oil prices were dragged sharply lower on Friday by weak US fuel demand, fears of a second wave of coronavirus cases in South Korea, and worsening US-China relations, but were still on track for a hefty monthly gain.
July Brent crude fell $1.16, or 3.3%, to $34.13 a barrel by 9.27am GMT while the more active August contract fell $1.11, or 3.1%, to $34.92. US West Texas Intermediate (WTI) crude was down $1.28, or 3.8%, at $32.43.
Both contracts were on course for their first weekly loss after four consecutive weeks of gains that leave them set for the biggest monthly gains in years thanks to production cuts and optimism over Chinese-led demand recovery, analysts said.
WTI is on track for a record monthly gain of 72% in May, with Brent set for a 35% increase that would represent its strongest monthly rise since March 1999.
“The global reaction to China’s move to propose new security laws for Hong Kong continues to increase, while there’s a score of new Covid-19 cases in South Korea,” said Rystad Energy’s head of oil markets, Bjørnar Tonhaugend.
US President Donald Trump is due to announce his response to the situation in Hong Kong later on Friday.
Thursday’s data from the Energy Information Administration (EIA) showed that US crude oil and distillate inventories rose sharply last week. Fuel demand remained slack even as various states lifted travel restrictions they had imposed to curb the coronavirus pandemic, analysts said.
Looking ahead, traders will be focusing on the outcome of talks on output cuts between oil cartel Opec and allies, including Russia (Opec+), in the second week of June.
Saudi Arabia and some Opec members are considering extending record production cuts of 9.7-million barrels per day beyond June, but have yet to win support from Russia.