Oil falls on demand concerns, tensions over Hong Kong
Worries resurface about speed of demand recovery.
Oil prices fell on Wednesday as concerns over how quickly fuel demand will recover tempered an easing of lockdowns to halt the spread of coronavirus, while US-China tensions added to negative sentiment.
Brent crude futures fell 50 cents, or 1.4per cent, to $35.67 by 0628 GMT. US West Texas Intermediate (WTI) crude futures were down 52 cents, or 1.5 per cent, at $33.83 a barrel.
The Organisation of the Petroleum Exporting Countries and producers including Russia, a grouping referred to as Opec+, are cutting their output by nearly 10 million barrels per day in May-June to buttress prices as measures to rein in the coronavirus pandemic have slashed fuel demand.
In the United States, where some states are opening up after lockdowns, optimism about an increase in demand has supported sentiment, but the recovery is fragile, analysts caution. The Memorial Day holiday just passed typically heralds the start of the peak US demand season.
"Early estimates suggest gasoline demand is down by as much as 30per cent from last year as people stay close to home," ANZ Research said in a note.
Some analysts and banks are predicting a balanced oil market as soon as June, but that could be too optimistic, according to Eurasia Group.
"There is ... a significant risk of repeat outbreaks and lockdowns," it said in a note. Still as US demand picks up, however slowly, there are signs that inventories are falling. US crude inventories are forecast to have fallen for a third week last week, according a Reuters poll of analysts.
Prices were also under pressure as tensions rose over China's proposed national security legislation on Hong Kong, with riot police deployed around the city's Legislative Council as activists called for protests against the bill.
Beijing's proposed security law would reduce the territory's separate legal status. China's parliament is expected to approve it by Thursday.
"Simmering US-China tensions added pressure on crude again," said Avtar Sandu, senior manager commodities at Phillip Futures.
Global energy investment is expected to fall by around 20 per cent or $400 billion in 2020, the biggest drop on record, because of the coronavirus outbreak, the International Energy Agency (IEA) said on Wednesday. - Reuters
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