Oil prices in the new week – black gold fell slightly

Oil prices fell on the first day of weekly trading following rising doubts about improving demand. Besides, increasing tensions between the United States and China is depressing the market.

Demand for oil has fallen since the beginning of the year, with the outbreak of coronavirus and the closure of economic activities and the cancellation of flights.

However, in the last three weeks, under the influence of two factors, crude demand recovered slightly. Notably, OPEC and its allies agreed on a deal to cut the world oil production by 9.7 million barrels. Moreover, the number of infected coronavirus cases has decreased massively, and the world economies started reopening gradually. Following these events, black gold has returned to an upward trend.

For the first time in 30 years, China has not set a clear target for its economic growth. China is the world’s second-largest oil consumer, and doubts have been raised about how to improve demand. 

Brent crude fell 0.5 percent to $ 34.94 a barrel. West Texas Intermediate dropped by 0.2 percent to $ 33.19 a barrel.

The tensions between the US and China are rising

Tensions between China and the United States are not limited to trade and the spread of coronavirus. China plans to enforce the National Security Act in Hong Kong, but Donald Trump warned that he would retaliate if that happened, on Friday.

Meanwhile, China’s foreign minister has warned of a cold war over escalating tensions between Beijing and Washington.

In addition to the concerns about the tensions between the two countries, another matter worries analysts. They speculate the possibility of a second wave of coronavirus. Quarantines and closure measures could plunge oil prices once again. 

Since the beginning of 2020, oil prices have fallen by approximately 40%. The coronavirus outbreak caused a slump in demand for crude oil. These fears led to a disagreement between the two biggest producers of black gold, Saudi Arabia, and Russia, in early March. However, OPEC and its allies implemented an agreement to reduce production. The group has reduced its total daily output by 9.7 million barrels. The deal gave hope that the measures would help stabilize oil prices in the future. 

Despite the decrease in production, storage was still getting oversupplied. Fears mainly grew in the US, leading the WTI benchmark to fall into negative prices on April 20, for the first time in history. And for the first time, brent prices dropped to a record low, below $20, on the very same day.