By Syndication Washington Post, Bloomberg · Olivia Raimonde · BUSINESS, US-GLOBAL-MARKETS
Futures in New York fell as much as 9.4% Friday, yet are still on track for a weekly gain. Beijing won't set a target for economic growth this year due to "great uncertainty" over the coronavirus, although it did announce some new stimulus spending. Meanwhile, a new Hong Kong security law stoked tensions between the U.S. and China. The U.S. condemned China's plan to enact the sweeping national security legislation, with Secretary of State Michael Pompeo calling the proposal "disastrous."
China abandoning its growth target "implies a certain degree of economic weakness," which could hurt oil prices, said Bob Yawger, director of the futures division at Mizuho Securities USA. "That is a very negative situation for crude oil demand."
In the oil market, there are warning signs that any recovery will be long and slow. The research unit of state-owned China National Petroleum Corp. said fuel demand in the country will drop by 5% this year. Plus, U.S. oil production shut-ins have peaked, Mark Rossano, an analyst with consultancy Primary Vision said.
Still, U.S. benchmark crude is set to post a fourth weekly gain. Output cuts by major producers have helped shrink inventories globally at the same time that OPEC+ works to implement its pledged reductions. The alliance's program this month is on the way to trimming 9.7 million barrels of daily crude output -- roughly 10% of global supplies. Meanwhile, in the U.S., stockpiles at the storage hub at Cushing, Oklahoma, shrank by the most on record last week.
China's oil demand earlier this month was probably at 92% of levels at the same time last year, IHS Markit said, and full-year consumption is likely to be around 8% lower than in 2019.