Oil falls but still set for biggest monthly gain in years

LONDON: Oil prices were dragged sharply lower on Friday by weak US fuel demand, fears of a second wave of coronavirus cases in South Korea and a worsening in US-China relations, but were still on track for a hefty monthly gain.

July Brent crude LCOc1 fell 61 cents, or 1.73pc, to $34.68 a barrel by 1408 GMT while the more active August contract lost 58 cents, or 1.61pc, to $35.45. US West Texas Intermediate (WTI) crude CLc1 was down 44 cents, or 1.31pc, at $33.27.

Both contracts were on course for their first weekly loss after four consecutive weeks of gains that leave them set for the biggest monthly advance in years thanks to production cuts and optimism over Chinese-led demand recovery, analysts said.

WTI is on track for a record monthly gain of 76pc in May, with Brent set for a 37pc increase that would represent its strongest monthly rise since March 1999.

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Oil prices, however, are still down more than 40pc since the start of this year and risks persist, including a supply glut and a further deterioration in US-China relations over Beijing’s plan to impose national security legislation on Hong Kong.

“The global reaction to China’s move to propose new security laws for Hong Kong continues to increase, while there’s a score of new COVID-19 cases in South Korea,” said Rystad Energy’s head of oil markets, Bjornar Tonhaugend.

US President Donald Trump is due to announce his response to the situation in Hong Kong later on Friday.

Thursday’s data from the Energy Information Administration showed that US crude oil and distillate inventories rose sharply last week. Fuel demand remained slack even as various states lifted travel restrictions they had imposed to curb the coronavirus pandemic, analysts said.

Saudi Arabia and some OPEC members are considering extending record production cuts of 9.7 million barrels per day beyond June, but have yet to win support from Russia.
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