Oil sunk as doubts emerged over the strength of China’s economic recovery and as tensions between Washington and Beijing flared.

Futures in New York fell as much as 9.4 per cent Friday, yet are still on track for a weekly gain. Beijing won’t set a target for economic growth this year due to “great uncertainty” over the coronavirus, although it did announce some new stimulus spending.

Meanwhile, a new Hong Kong security law stoked tensions between the U.S. and China. The U.S. condemned China’s plan to enact the sweeping national security legislation, with Secretary of State Michael Pompeo calling the proposal “disastrous.”

China abandoning its growth target “implies a certain degree of economic weakness,” which could hurt oil prices, said Bob Yawger, director of the futures division at Mizuho Securities USA. “That is a very negative situation for crude oil demand.”

In the oil market, there are warning signs that any recovery will be long and slow. The research unit of state-owned China National Petroleum Corp. said fuel demand in the country will drop by 5 per cent this year.

Plus, U.S. oil production shut-ins have peaked, Mark Rossano, an analyst with consultancy Primary Vision said.

Still, U.S. benchmark crude is set to post a fourth weekly gain. Output cuts by major producers have helped shrink inventories globally at the same time that OPEC+ works to implement its pledged reductions.

The alliance’s program this month is on the way to trimming 9.7 million barrels of daily crude output -- roughly 10 per cent of global supplies. Meanwhile, in the U.S., stockpiles at the storage hub at Cushing, Oklahoma, shrank by the most on record last week.


  • West Texas Intermediate crude for July delivery dropped US$1.23 to US$32.69 a barrel at 11:02 a.m. in New York.
  • Brent for July settlement fell US$1.60 to US$34.46 a barrel on the ICE Futures Europe exchange
  • China’s oil demand earlier this month was probably at 92 per cent of levels at the same time last year, IHS Markit said, and full-year consumption is likely to be around 8 per cent lower than in 2019.

More oil-market news

  • America is doubling up on imports of the key ingredient to make premium gasoline from India ahead of summer after domestic refiners slashed production in response to the virus-driven demand collapse.
  • The cheapest gasoline in nearly two decades won’t be enough to entice nervous Americans to hit the road for Memorial Day weekend, as Covid-19 fears and economic woes continue weigh on prospective drivers.
  • Royal Dutch Shell Plc and Eni SpA won dismissal of a US$1 billion U.K. lawsuit brought against them over allegations they knew about bribes in a Nigerian oil deal.

--With assistance from Alex Longley.