Oil traded near $33 a barrel as an escalating war of words between the U.S. and China added to caution over the prospects for a global recovery in demand. China warned on Sunday that some in the U.S. were pushing the countries toward a new Cold War, stoking concerns that deteriorating relations between Beijing and Washington could complicate the market’s recovery from a historic demand crash. Futures edged higher in New York after falling earlier, with trading volumes thin due to holidays in the U.S., U.K. and Singapore.
Crude has surged more than 75% this month and the boss of the International Energy Agency gave bulls further hope, saying in an interview that demand may well recover from an unprecedented shock caused by Covid-19. Even so, the return of U.S.-China tensions has soured risk sentiment and rekindled more-immediate demand concerns. There’s also concern that some supplies idled during oil’s rout will start to return.
“With prices above $30, the recent rally may have pushed too far,” said Hans van Cleef, senior energy economist at ABN Amro. “Inventories remain highly elevated and every disappointment could trigger a fresh wave of profit taking. I will continue to point at downside risks towards my clients.”
The U.S. should give up its “wishful thinking” of changing China, Foreign Minister Wang Yi said during his annual news briefing on the sidelines of National People’s Congress meetings in Beijing. He also warned America not to cross China’s “red line” on Taiwan.
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