Oil fell from the highest level in more than two months with doubts emerging about the strength of the Chinese economic recovery and with the escalation of tensions between Washington and Beijing.
The research unit of the state-owned China National Petroleum Corporation said that the country's fuel demand would decrease by 5% this year. Also, India's consumption may not recover to levels prior to the coronavirus for months.
Meantime, there are warning signs that any recovery will be long and slow, driving New York futures to fall 5.6%.
Beijing will not set a target for economic growth this year due to "significant uncertainty" about the coronavirus, although it has announced some new stimulus spending.
China is the 2nd biggest oil consumer in the world with 13,500,000 bpd, following the U.S., which consumes 20,000,000 bpd.
Equity markets fell from Asia to Europe amid expectations that tensions between the U.S. and China will escalate due to concerns about a new security law in Hong Kong.
However, the market is strengthening than it was even two weeks ago. Futures prices tend to make a fourth weekly gain as supply and demand begin to rebalance, while physical barrels also rise.
Also, US drilling workers are slashing 1.75 million bpd from current production by early June.
“You had headlines from Hong Kong and China, and a sharp retrenchment on the” Hong Kong equity index, said Petromatrix Managing Director Olivier Jakob. “We need to see some confirmation that demand is truly coming back.”
"You have major addresses from Hong Kong and China, and a sharp decline in the stock index in Hong Kong. We need to see some confirmation that demand is actually coming back," said Olivier Jakob, managing director of Petromatrix.
Global Oil Prices
West Texas Intermediate (WTI) crude for July delivery dropped $1.89 to $32.03 a barrel, while the Brent crude fell $1.68, or 4.7%, to $34.38 for the same month.
IHS Markit separately said that Chinese demand for oil earlier this month was likely at 92% of levels at the same time last year, and whole-year consumption is likely to be almost 8% lower than in 2019.
Meanwhile, cuts in production by the major producers had accumulated and eroded stocks.
Inventories at the U.S. Storage Center in Oklahoma fell, with the largest number recorded last week in the hope of raising prices again.
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