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NEW YORK: Oil futures tumbled on Wednesday after US President Donald Trump said he was working on a strong response to China’s proposed security law in Hong Kong and as some traders doubted Russia’s commitment to deep production cuts.
Many worried that Russia may not agree to extending production cuts ahead of the meeting in less than two weeks between the Organization of the Petroleum Exporting Countries and its allies.
Brent crude fell 91 cents, or 2.5 per cent, to $35.26 a barrel by 12:10 EST (1610 GMT) and US West Texas Intermediate (WTI) crude was down 87 cents, or 2.5 per cent, at $33.48, after falling more than 5 per cent in early trading.
“This is a market that has rallied rather strongly on cohesiveness that has emerged recently from the global oil producers,” said John Kilduff, partner at Again Capital LLC in New York. “There seems to be a crack in the armour there,” he added.
The group known as OPEC+ is cutting output by nearly 10 million barrels per day (bpd) in May and June. Some question whether it will continue to do so as demand recovers after many countries ease coronavirus lockdowns.
“Russia appears reluctant to commit to any extensions that might be discussed at next month’s meeting,” Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois, said in a report.
Gloomy forecasts over the economic impact of the pandemic also weighed on crude. Economists estimate another 2 million Americans filed initial applications for unemployment insurance last week.
The US Labor Department will report on Thursday. The euro zone economy will probably shrink between 8 per cent and 12 per cent this year, European Central Bank President Christine Lagarde said, warning a the outcome would be between medium and severe. In another sign of weak fuel demand, Japan’s refineries operated at only 56.1 per cent of capacity last week, the lowest since at least 2005.