US, China Feud Heightens Oil Market Tension
Rising tensions between the United States and China following the closure of China’s consulate in Houston last week and retaliation in Chengdu caused oil prices to nosedive on Monday.
Brent crude dipped by 1.75% or 76 cent to $42.58 a barrel by 15:18 GMT on Monday afternoon while U.S. West Texas Intermediate (WTI) crude also dropped to $40.71 a barrel, down by 58 cents or 1.40%.
The feud between the two world powers was as a result of the raging the coronavirus, which the Trump administration had accused China of failing to control, and also of espionage, intellectual property theft and human rights violations.
The Trump administration among other issues cited human rights abuses against predominantly Muslim ethnic minorities in the Xinjiang region in China’s far west, and subsequently 11 Chinese companies were barred from buying American technology and other products.
According to a report in the Reuters, the fall came as investors sought safe havens, such as gold and bonds, given tensions between the world’s two biggest economies following the closures of consulates in Houston and Chengdu, and also with Global cases of the new coronavirus exceeded 16 million.
Brent the report said is still on track for a fourth straight monthly gain in July and WTI is set to rise for a third month as supply cuts from the Organization of the Petroleum Exporting Countries and Russia provided support.
Oil demand has risen after plunging in the second quarter, but the recovery is uneven as lockdowns are reimposed because of resurging infection rates.
Oil appears to be caught between opposing forces, crushing price volatility and ranges,” said Jeffrey Halley, OANDA’s senior market analyst
“Also expectations of U.S. stimulus measures and a weak dollar, which makes dollar-denominated commodities cheaper for holders of other currencies, capped losses.
“The U.S. dollar index reached its lowest since September 2018, hurt by deteriorating U.S.-China relations and domestic economic concerns.
“U.S. Senate Republicans on Monday are expected to unveil a new $1 trillion coronavirus aid package,” the Reuters stated