Oil Prices Turn Negative On U.S.-China Tensions
Oil prices slipped on Friday, shrugging off a weaker U.S. dollar, as tensions between the United States and China rose against a backdrop of rising coronavirus cases.
Brent crude LCOc1 fell 25 cents to $43.06 a barrel by 0713 GMT, and U.S. West Texas Intermediate (WTI) crude CLc1 eased 28 cents to $40.79.
China ordered the United States to close its consulate in the city of Chengdu on Friday, responding to a U.S. demand this week that China close its Houston consulate, as relations between the world’s two largest economies deteriorate.
The dollar slid to 22-month lows against a basket of currencies .DXY.
A weaker dollar usually spurs buying of commodities priced in the greenback, like oil, because they become cheaper for holders of other currencies.
The U.S. economic outlook has darkened in the past month amid renewed lockdowns in some states from surging coronavirus cases, according to economists in a Reuters poll.
The number of Americans filing for unemployment benefits hit 1.416 million last week, unexpectedly rising for the first time in nearly four months, suggesting the U.S. economic recovery is stalling amid a resurgence in COVID-19 cases.
The United States on Thursday recorded more than 1,000 deaths from COVID-19 for a third straight day as the pandemic escalates in its southern and western states.
Globally, more than 15 million have been infected and over 620,000 have died.
While the rise in infections has fanned fears of renewed government lockdowns, worries that oil demand could be hit have been exacerbated by tensions between the United States and China – the world’s top two oil consumers.
In China, congestion at east coast oil ports is adding to costs for shippers and importers even as fuel demand stalls.
Oil prices could see a near-term correction if a recovery in fuel demand slows further, especially in the United States, Barclays Commodities Research said.
The bank lowered its oil market surplus forecast for 2020 to an average of 2.5 million barrels per day (bpd) from 3.5 million bpd previously.