Oil slides on U.S.-China tensions

By Laura Sanicola NEW YORK (Reuters) - Oil futures tumbled on Wednesday after U.S. President Donald Trump said he was working on a strong response to China's proposed security law in Hong Kong and as some traders doubted Russia's commitment to deep production cuts

Reuters May 28, 2020 02:05:17 IST
Oil slides on U.S.-China tensions

Oil slides on USChina tensions

By Laura Sanicola

NEW YORK (Reuters) - Oil futures tumbled on Wednesday after U.S. President Donald Trump said he was working on a strong response to China's proposed security law in Hong Kong and as some traders doubted Russia's commitment to deep production cuts.

Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman agreed during a telephone call on further "close coordination" on oil output restrictions, the Kremlin said.

Still, many felt Russia was sending mixed signals ahead of the meeting in less than two weeks between the Organization of the Petroleum Exporting Countries and its allies.

The group known as OPEC+ is cutting output by nearly 10 million barrels per day (bpd) in May and June.

"It sounds great on paper, but the market is holding back excitement until we get a few more details about whether there will be cuts, how many barrels will be cut, and the length of the cuts," said Phil Flynn, senior analyst at Price Futures Group.

Brent crude futures fell $1.65 to $34.52 a barrel, a 4.6 percent loss. U.S. West Texas Intermediate (WTI) crude was down $1.54 , or 4.5%, at $32.81.

Meanwhile, tensions between the U.S. and China continued to rise after China announced plans to impose new national security legislation on Hong Kong, prompting protests in the street.

U.S. Secretary of State Mike Pompeo said he had certified that Hong Kong no longer warrants special treatment under U.S. law as it did when it was under British rule, a blow to its status as a major financial hub.

GRAPHIC: Weekly changes in petroleum stocks in the U.S. https://fingfx.thomsonreuters.com/gfx/editorcharts/bdwvkrmkxpm/eikon.png

Gloomy forecasts over the economic impact of the pandemic also weighed on crude.

Economists estimate another 2 million Americans filed initial applications for unemployment insurance last week.

The U.S. Labor Department will report on Thursday.

"Reduction of the huge domestic crude surplus of around 47 million barrels is proceeding at a much slower pace than the decline in production as refiners have been hesitant in ramping up activities," Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, said in a report.

The euro zone economy will probably shrink between 8% and 12% this year, European Central Bank President Christine Lagarde said, warning the outcome would be between medium and severe.

In another sign of weak fuel demand, Japan's refineries operated at only 56.1% of capacity last week, the lowest since at least 2005.

Graphic: Demand/supply balance https://fingfx.thomsonreuters.com/gfx/mkt/dgkplwgonvb/ieabalance.JPG

(Reporting by Laura Sanicola, Additional reporting by Bozorgmehr Sharafedin in London and Aaron Sheldrick in Tokyo; Editing by David Goodman, David Evans, David Gregorio and Tom Brown)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.