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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Oil Tumbles On Fears Of Slow Chinese Economic Recovery

Oil prices dipped by more than 6 percent early on Friday, after China’s top policy-setting meeting didn’t set an annual economic growth target because of “great uncertainty” of the recovery from the coronavirus.

As of 7:54 a.m. EDT WTI Crude was plunging by 5.66 percent at $32, and Brent Crude was down 4.74 percent on the day to $34.35.

China’s National People’s Congress (NPC), the most important policy-setting annual event in the Communist country, began on Friday and analysts were expecting to see the economic growth targets for 2020 and the stimulus to bolster the economy.

In case of stimulus for supporting infrastructure and railroads and other commodity-intensive sectors, analysts expected that government support could bolster China’s demand for crude oil, fuels, and other commodities.  

By ditching the GDP growth target for this year because of high uncertainty, China roiled earlier market expectations and raised fears of slower-than-expected economic and oil demand recovery.

“The commodity market, in general, was looking for a bigger infrastructure pump from the NPC so there is bound to be an element of disappointment,” Stephen Innes, chief global market strategist at AxiCorp, said, as carried by Reuters.

In another developing story involving China, Beijing said that it plans to impose a new national security law for Hong Kong, which drew a reaction from U.S. President Donald Trump. President Trump said on Thursday that if China were to impose a new security law in the former British colony, the United States would “address that issue very strongly.”

The lack of Chinese GDP guidance and the renewed rhetoric between the U.S. and China were depressing global equity markets, the Dow futures, and oil prices early on Friday.  

Despite the slump in prices early on Friday, oil was set to end a fourth consecutive week of weekly gains as global production cuts from OPEC+ and North America and slowly recovering oil demand with eased lockdowns give hope to investors and traders that the worst of the downturn may be behind us.

By Tsvetana Paraskova for Oilprice.com

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  • Maxander on May 22 2020 said:
    China's growth recovery had no problem now. Only the thing is that China wont be measuring its GSP in terms of numbers but in terms if goals for this year 2020 as the data would give wrong information about the real economic status during & post coronavirus quarters.
    Talking about China's action on Hong kong is an excellent indication that Hong Kong will trurly become a most important financial hub in World taking over Singspord even London.
    This is because China is planning to make Hong Kong its Yuan hub for foreign investors, borrowers, lender & it will biggest Yuan lending facility in entire world which will not only connect its Yuan lending facility for Belt & Road nations but even to Aftica, Europe, South America, South Asia.
    Since the time Hong Kong has been handed over to Mainland China, there was One Country Two Systems & it became difficult for Chinese policy makers to implement policies under Two system.
    Now, it will be truely One Country One System & Hong Kong will get all social security, benefits of that in Mainland China. I think the best time for Hobg Kong has just started with China's mission to make Hong Kong world's biggest Yuan Hub.
  • Maxander on May 22 2020 said:
    Nations, foreign companies, corporates borrowing big Chinese Yuan loans will be much easier, hassel free & quick under One Country One System of Mainland China's unification with Hong Kong.
  • Mamdouh Salameh on May 22 2020 said:
    Analysts are fickle. They either expect things higher or lower but they never get things right.

    The reason China’s National People’s Congress (NPC), the most important policy-setting annual event in the Communist country, hasn’t set an economic growth target for 2020 is that Chinese decision makers can’t set a target without assessing first the damage that the coronavirus outbreak has inflicted on the economy. Once this has been accomplished, they will set a relevant growth rate.

    There were reports that China’s economy might have declined by more than 6% in the first three months of 2020. However, judging by the fact that China’s crude oil imports have rebounded to nearly 2019 levels according to Bloomberg News on the 18th of May, I tend to discount such loss and estimate it 2.5%-3.0% only. In fact, some projections see China’s economy growing at 6.8% in 2021 compared with 6.1% in 2019.

    Oil prices could be expected to hit $40-$50 a barrel in the second half of 2020 and touch $60 in early 2021.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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