After posting the first weekly gain in a month, oil prices plunged early on Monday as tensions between the United States and China grew over the origin of the coronavirus, which is battering oil demand and increasing the global oil glut.
During the weekend, U.S. Secretary of State Mike Pompeo told ABC News’ ‘This Week’ program that “there’s enormous evidence” that COVID-19 originated in a Wuhan lab.
“China has a history of infecting the world and they have a history of running substandard laboratories. These are not the first times that we’ve had a world exposed to viruses as a result of failures in a Chinese lab,” Secretary Pompeo tweeted on Sunday.
The renewed tension between the two largest economies in the world weighed down on oil prices early on Monday, with WTI Crude losing as much as 7 percent at one point before recouping some of the losses.
The sizable global oil glut with very limited storage space available was also dragging oil prices down, although expectations that demand is slowly beginning to tick up lent some support.
Last week, at the start of the OPEC+ cuts and with mounting evidence that U.S. shale producers would be scaling back production faster and more than expected, oil prices closed the week on the positive note, for the first time in over a month.
While the partial easing of lockdowns in some U.S. states and several European countries – including large economies such as Italy, Germany, and Spain – supported the view that demand will begin to slowly recover, the latest manufacturing data for April was as gloomy as it gets, also weighing on oil prices. In France, manufacturers reported business conditions deteriorating at a record pace in April, according to the IHS Markit France Manufacturing Purchasing Managers' Index, while the same index for Italy showed output and new orders plunged at the fastest pace in over 22 years of data collection.
By Tsvetana Paraskova for Oilprice.com
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