- WTI dropped by over 6% on Monday, paring last week’s gains.
- Risk sentiment took a hit as President Trump renews tariffs threat on China.
The West Texas Intermediate (WTI) crude, North America’s oil benchmark, fell on Monday as the US-China tensions threatened to hold back the economic recovery and worsen the excess supply situation.
The front-month WTI contract dropped by more than 6.5% to $18.50 per barrel during the Asian trading hours and Brent futures declined by 2% to $25.90 per barrel.
The black gold came under pressure after the US President Trump said tariffs would be an ultimate punishment for China. The US intelligence agency on Sunday accused China of hiding the severity of the coronavirus outbreak to stock up medical supplies and the Secretary of State Mike Pompeo said China was responsible for the pandemic.
The anti-China rhetoric triggered fears of a fresh US-China trade war and forced investors to sell oil and other risky assets and pour money into the US dollar. The dollar index, which tracks the value of the greenback against majors, rose more than 0.6%, snapping the six-day losing streak.
Oil prices rose last week as major oil producers led by Saudi Arabia and Russia were set to begin cutting output by 9.7 million barrels per day from May 1. Further, the US drillers cut 53 oil rigs in the week ended May 1, bringing the total count down to 325, the lowest since June 2016, data published by the energy services firm Baker Hughes showed on Friday.
What’s more, Exxon Mobil Corp and Chevron Corp – the top two US producers – said they would each cut output by 400,000 barrels per day in the second quarter.