Oil lower on US-China tensions but heads for huge monthly rise

NEW YORK: Oil prices eased on Friday on fears of worsening Washington-Beijing relations and lacklustre US fuel demand, but were still headed for sharp monthly gains.

July Brent crude futures fell 34 cents, or 1 per cent, to $34.95 a barrel by 11:15 a.m. EDT (1515 GMT). US West Texas Intermediate (WTI) crude was down 12 cents, or 0.4 per cent, at $33.59.

Both benchmarks were on course for steep monthly gains due to global production cuts and optimism over demand growth as US states and countries reopen after coronavirus-related lockdowns.

WTI is on track for a record monthly rise of 78 per cent after trading negative last month. Brent is set for a 38 per cent increase for its strongest monthly rise since March 1999.

This year, oil prices have fallen more than 40 per cent largely due to slashed fuel demand caused by efforts to limit travel and shut businesses to combat the virus.

A further deterioration in US-China relations over Beijing’s plan to impose national security legislation on Hong Kong threatens to batter oil further.

US President Donald Trump is due to announce his response to the situation in Hong Kong later on Friday.

“Sustaining these price declines will hinge, to a significant extent, on Trump’s expected comments today that could determine how the oil market finishes this week and month,” said Jim Ritterbusch of Ritterbusch and Associates.

Also weighing on prices was Thursday’s Energy Information Administration data showing US crude oil and distillate inventories rose sharply last week, while fuel demand remained slack.

The market is now looking ahead to the outcome of output cut talks between the Organization of the Petroleum Exporting Countries and allies including Russia, known as OPEC+, in the second week of June.

Some OPEC members are considering extending record production cuts of 9.7 million barrels per day beyond June, but have not yet won Russia’s support.