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China is set to impose new national security legislation on Hong
Kong, prompting a warning from U.S. President Donald Trump.
Beijing also failed to set an economic growth target as the
pandemic hammers the word's second-largest economy.
Brent crude dropped $1.72, or 4.8%, to $34.34 a barrel at 1150
GMT, after falling as low as $33.54. U.S.
West Texas Intermediate (WTI) crude declined by $1.94, or 5.7%,
to $31.98.
"Investors are once again having to contend with an intensifying
war of words between the U.S. and China," said Stephen Brennock
of broker PVM.
"The coronavirus has nullified a decade of global oil demand
growth and the recovery will be slow."
Oil has slumped in 2020, with Brent hitting a 21-year low below
$16 in April and U.S. crude falling below zero. With fuel use
rising and supply cuts starting, Brent has since more than
doubled and was on track for a fourth weekly gain.
"The oil market is not out of the woods yet," said Eugen
Weinberg of Commerzbank. "We regard the latest price rally on
the oil market to be excessive."
The Organization of the Petroleum Exporting Countries and
allies, known as OPEC+, are reducing supply by a record 9.7
million barrels per day from May 1 to support the market.
Export figures suggest OPEC+ made a strong start. In a sign of
the glut easing, U.S. crude inventories fell last week.
Gasoline demand is rising and some airlines are planning for a
return of European travel.
Traders will be keeping an eye on U.S. demand for the Memorial
Day weekend, a time when fuel use usually rises.
(Additional reporting by Aaron Sheldrick; Editing by Richard
Pullin and David Evans)
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