By Peter Nurse
Investing.com - Oil prices slumped Friday, weighed by concerns of an extended economic slowdown in China as well as the increased likelihood of a trade war.
At 9 AM ET (1300 GMT), U.S. crude futures traded 3.9% lower at $32.59 a barrel. The international benchmark Brent contract fell 3.9% to $34.65.
Earlier Friday, China, at the annual National People’s Congress in Beijing, dropped its official target for gross domestic product growth this year, for the first time in 30 years, suggesting a longer than expected period of economic uncertainty in the world’s largest importer of oil.
China’s abandonment of the growth target "could be interpreted as putting less focus on infrastructure investment and could be viewed as negative for oil," Stephen Innes, chief global market strategist at AxiCorp, told Reuters.
"The commodity market, in general, was looking for a bigger infrastructure pump from the NPC so there is bound to be an element of disappointment.”
This wasn’t the only news to come out of Beijing Friday, as China also announced plans to impose a national-security law in Hong Kong - a move that has ratcheted up tensions with the West, and the U.S. in particular.
President Donald Trump promised retaliation if Hong Kong’s existing privileges were ended. What this retaliation would comprise of is unknown at this point, but it was only in January that the two most powerful economic powers in the world signed a trade deal, signalling the end of a costly trade war. This deal now looks under threat.
This news has overturned the recent positivity, with crude up around 80% this month, as production cuts have kicked in and demand has started to return.
In fact, consultant IHS Markit pegged Chinese oil demand at more than 90% of normal pre-covid levels in late April and moving higher. Additionally, gasoline demand is expected to increase in the United States, with the upcoming Memorial Day weekend kicking off the summer driving season.
Next up are the latest figures on oil rigs in operation, with Baker Hughes set to release its U.S. oil rig count at 1:00 PM ET (17:00 GMT). These will be of particular interest given that prices are reaching levels that could prompt companies to resume more production.
Last week the rig count dropped to 258 from 292 the week before.