Oil edges past $33 but rising US-China tensions cap rally

Bloomberg

Oil traded near $33 a barrel as an escalating war of words between the US and China added to caution over the prospects for a global recovery in demand.
China has warned that some in the US were pushing the countries towards 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 US, UK and Singapore.
Crude has surged more than 75% this month and the boss of the International Energy Agency (IEA) 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 US-China tensions 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 US should give up its “wishful thinking” of changing China, Foreign Minister Wang Yi said during his 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.
While fuel consumption climbs in some nations with the easing of lockdown restrictions, the cheapest US gasoline in nearly two decades won’t be enough to entice nervous Americans to hit the road for Memorial Day weekend. The uncertainty around travel is so great due to the virus that American Automobile Association is not releasing a forecast for the first time in 20 years.
Big oil annual general meetings in US and Europe this week should shed light on how heavily producers have been hit by lockdowns, with Total, BP, Exxon Mobil and Chevron among those fronting shareholders.

“In the absence of strong government policies, a sustained economic recovery and low oil prices are likely to take global oil demand back to where it was, and beyond,” Fatih Birol, the head of the IEA, said in an interview, urging governments to focus spending on combating climate change.
Big oil annual general meetings in the US and Europe this week should shed light on how heavily producers have been hit by lockdowns, with Total SA, BP Plc, Exxon Mobil Corp. and Chevron Corp. among those fronting shareholders. Meanwhile, Russian President Vladimir Putin has given his government until June 15 to come up with a plan to support the country’s oil industry.