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Oil dips as US-China tensions add to nerves on global economy
[SYDNEY] Oil slipped in Asia as an escalating war of words between the US and China added to caution over the prospects for a global recovery in demand.
Futures in New York fell 1.4 per cent, adding to a 2 per cent pullback on Friday. Chinese Foreign Minister Wang Yi warned that American leaders are potentially pushing toward a new Cold War, further stoking investor nerves after Beijing on Friday abandoned its annual growth target in 2020 due to the uncertain impact from the Covid-19 outbreak. The US market is closed on Monday for the Memorial Day holiday.
Prices still rose almost 13 per cent last week as producers around the world continued to curb output. US explorers laid down another 21 oil rigs, bringing the total to the lowest since 2009. The rapid pullback in production at US shale fields is exposing the industry's weak spot - the need to keep drilling new wells to replace fast-declining output.
Doubts linger over the trajectory of the demand recovery as countries begin the gradual easing of lockdowns. US travel over the Memorial Day holiday weekend could be the lowest on record as Covid-19 worries keep divers off the roads.
Big oil annual general meetings in the US and Europe this week should shed light on how heavily producers have been hit by lockdowns, with Total SA, BP, Exxon Mobil Corp and Chevron Corp among those fronting shareholders. Meanwhile, Russian President Vladimir Putin has given his government until June 15 to come up with a plan to support the country's oil industry.