Fears of a re-run of prices plunging below zero also deterred investors. The manager of a US$500 million oil exchange-traded fund in Hong Kong said its broker refused to let it increase holdings of crude futures. S&P Global Inc., which is behind the most closely followed commodity index, said it will roll West Texas Intermediate futures for July into August, while the United States Oil Fund LP said it will halve holdings in the July contract.
While there are signs the plunge in oil consumption might have bottomed out in some markets, traders believe it’s likely to take more than a year and perhaps longer for demand to return to pre-coronavirus levels. The massive glut built up over March and April will also keep prices depressed even as fuel use picks up. Meanwhile, rising tension between the U.S. and China over the virus threatens to hamper the global economic recovery.
“The coronavirus re-opening watch will remain centre stage, and the latest weekly U.S. stockpiles and demand numbers will also be key in shaping market sentiment,” said Vandana Hari, founder of Vanda Insights. The U.S. raising tensions with China over the virus is also weighing on the market, she said.
WTI for June delivery declined 6.5% to US$18.49 a barrel on the New York Mercantile Exchange as of 10:54 a.m. in Singapore. It rallied almost 17% over the five previous sessions, the first weekly gain in a month.
Brent for July settlement fell 2.2% to US$25.87 a barrel on London’s ICE Futures Europe exchange after advancing 23% last week.
Algerian Energy Minister Mohamed Arkab, who holds OPEC’s rotating presidency, called on members of the cartel to implement more than 100% of their agreed cuts under the deal that took effect from May 1. There’s evidence production is also falling in countries that are not party to the OPEC+ deal. In the U.S., the world’s largest producer, the oil rig count fell for a seventh straight week.
President Donald Trump said he has little doubt that China misled the world about the scale and risk of the virus and then sought to cover it up as the disease became a global pandemic. That came after Secretary of State Michael Pompeo said “enormous evidence” shows the Covid-19 outbreak began in a laboratory in Wuhan, China, without providing any proof for his claims.
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