Energy

Oil drops 2%, but still posts fourth straight week of gains

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Oil storage tanks stand at the RN-Tuapsinsky refinery, operated by Rosneft Oil Co., in Tuapse, Russia, on Monday, March 23, 2020.
Andrey Rudakov | Bloomberg | Getty Images

Oil prices tumbled on Friday on rising U.S.-China tensions and doubts about how quickly fuel demand would recover from the coronavirus crisis.

Fuel demand plummeted as the coronavirus pandemic caused governments to impose restrictions on movement and businesses closed their doors.

Oil has rallied in recent days as activity starts to resume, but prices dropped after China said on Friday it would not publish an annual growth target for the first time. Beijing also pledged more government spending as the pandemic kept hammering the economy.

"The coronavirus has nullified a decade of global oil demand growth and the recovery will be slow," said Stephen Brennock of broker PVM.

Brent crude fell 93 cents, or 2.58%, to settle at $35.13 per barrel, after gaining nearly 1% on Thursday. West Texas Intermediate crude dropped 67 cents, or 1.98%, to settle at $33.25 per barrel, having gained more than 1% in the last session.

China is set to impose new national security legislation on Hong Kong after last year's pro-democracy unrest, a Chinese official said on Thursday, drawing a warning from President Donald Trump that Washington would react "very strongly."

Brent and U.S. crude were set for 8% and 12% weekly gains, respectively, but some said they may have come too far, too fast.

"A second wave (of the coronavirus) is not such a remote possibility and a new round of lockdowns could send prices back to much lower levels very quickly, and the market knows it," said Rystad Energy senior oil markets analyst Paola Rodriguez Masiu.

Oil prices have plummeted more than 40% so far in 2020, rebounding in part due to efforts by OPEC+ to reduce supply. The Organization of the Petroleum Exporting Countries and allies, known as OPEC+, are reducing supply by a record 9.7 million barrels per day from May 1 to support the market.

In a sign of the glut easing, U.S. crude inventories fell last week.

Gasoline demand is rising and some airlines are planning for a return of European travel.

The U.S. rig count, an early indicator of future output, fell by 21 to a record low 318 in the week to May 22, according to data on Friday from energy services firm Baker Hughes Co going back to 1940.